^^^55^ 

EX  L1BFUS 


No.  44.      I      EXCELSIOR   LIBRARY      I     '»«« •«  ««„*.. ,,.,. 

I   Subscription    $1.<M) 
Aug.,  isat;.  OF   POPULAR    BOOKS.  l'*r  Year. 


•  Money 
Silver  and  Finance 


BY 

J.  HOWARD  COWPERTHWAIT. 


FIFTH  EDITION. 


Excelsior  Publishing  House,  26  City  Hall  Place,  New  York. 

The  Trade  Supplied  by 

THE   AMERICAN    NEWS    COMPANY 

And  Its  Branches. 


Entered  at  the  Post  Office,  New  York,  N.  Y.,  as  Second  Class  Matter. 
March  3rd,  1896. 

TkeSan  Francisco  News  Compz 

20*  and  208  Post  Street, 


COPYRIGHT,  1892  AND  1896, 

BY 

J.HOWARD  COWPERTHWAIT 


PREFACE  TO  THE  FIRST  EDITION. 

THE  author  presumes  that  a  business 
man  may  be  pardoned  tor  writing  upon  a 
business  question,  when  that  question  is 
paramount  in  public  importance. 

He  has  tried  to  answer  The  Silver  Ques- 
tion by  arguments  based  both  upon  the 
truths  of  financial  science  and  upon  the 
principles  which  underlie  the  operation  of 
what  is  called  business.  And,  admitting 
shortcomings,  he  ventures  to  hope  that  a 
student  in  finance  may  find  in  this  volume 
a  sought-for  portrayal  of  business  ways; 
that  a  busy  man  of  affairs  may  find  herein 
some  scientific  points  which  may  have 
hitherto  escaped  his  attention ;  or,  that  a 
few  of  the  readers  of  this  book  will  be 
compensated  for  their  trouble  by  the  fast- 
ening more  firmly  together  of  the  links  in 
their  own  chain  of  evidence  against  silver 
fallacies.  The  author's  position  may  be  that 


iv  Preface. 

of  a  distributer  of  ideas,  rather  than  that  of 
a  producer  ;  and  he  will  make  no  complaint 
if  he  be  called  a  mere  retailer,  who  simply 
does  his  best  to  display  the  product  of  others 
rn  that  manner  which  hie  judgment  tells  him, 
truly  or  not,  may  suit  the  general  public. 

The  first  chapter  herein  appeared  origi- 
nally in  LippincoWs  Magazine:  and  the 
subject-matter  of  an  essay,  written  for  The 
Engineering  and  Mining  Journal,  has  been 
divided  for  using  now  a  second  time.  Many 
newspapers  kindly  reproduced  these  arti- 
cles wholly  or  in  part. 

Sufficient  excuse  for  the  publication  of 
a  book  of  this  character  is  thought  to  lie 
in  these  facts :  The  Senate  of  the  United 
States,  Fifty-first  Congress,  passed  a  free- 
coinage  measure;  the  House  came  near 
agreeing  to  this  measure;  the  Fifty -second 
Congress  was  elected  at  the  time  when  the 
"  silver  craze "  was  said  to  be  in  posses- 
sion of  the  wits  of  the  people ;  and  now 
prominent  men  in  and  out  of  Congress,  and 
influential  journals,  are  advocating  ener- 
getically, the  policy  of  free  silver  coinage, 
or  unlimited  silver  purchase. 


*  *  * 

BROOKLYN,  N.  Y.,  January,  1892. 


PREFACE  TO  THE  THIRD  EDITION. 


THE  events  of  the  four  years  which  have  elapsed 
since  this  work  was  written  have  not  made  abso- 
lutely necessary  any  changes  in  the  arguments 
used.  While  it  is  true  that  the  purchasing  clause 
of  the  Silver  Purchase  Law  has  been  repealed,  and 
thereby  one  of  the  targets  of  this  book  removed, 
3ret  it  is  also  true  that  the  free-coinage  movement 
of  to-day  still  commands  the  vote  of  a  majority* of 
the  Senate  of  the  United  States  and  the  influence 
of  prominent  men  and  journals,  particularly  in  the 
West  and  the  South.  Asking  the  reader  to  bear 
in  mind  that  the  United  States  no  longer  buys 
silver  bullion,  the  author  feels  justified  in  thinking 
that  it  may  be  better  to  leave  the  arguments  as 
originally  put  forth,  for  if  they  possessed  any  value 
at  that  time,  they  should  now  possess  a  greater 
value,  the  price  of  silver  bullion  having  continued 
to  decline,  as  predicted,  the  production  of  gold 
having  grown  to  the  vast  sum  of  $200,000,000 
worth  per  annum,  and  the  world's  stock  of  available 
gold  having  largely  increased. 

Foot-notes  have  been  freely  introduced. 

Recent  financial  events  are  treated  in  a  new  con- 


vi  Preface. 

eluding  chapter.  There  the  author  has  taken  the 
opportunity  for  giving  his  views  on  the  Panic  of 
1803,  revenue  deficiency,  bond -issuing,  redundancy, 
the  circulation,  bi-metallism,  and  the  present  finan- 
cial situation.  Reasons  are  given  also  for  placing 
the  cause  of  Sound  Money  first  in  the  coming  elec- 
tion, even  to  the  exclusion  of  all  other  causes. 

NEW  YORK,  May,  1896. 


PREFACE  TO  THE  FIFTH  EDITION. 

PUBLIC  Opinion  has  decreed  that  the  Election  of 
1896  shall  settle  the  Currency  Question.  In  spite 
of  protests,  tardy  politicians  are  being  swept  into 
either  the  Gold  Camp  or  the  Silver  Camp.  Bi- 
metallism is  no  longer  a  good  fence  to  perch  upon, 
and  Protection  is  no  longer  a  barrier  against  inquiries 
on  the  all-absorbing  issue. 

The  Republican  chieftain,  with  hands  outstretched 
for  a  Protection  banner,  has  been  told  to  carry  the 
Gold  Standard.  Two-thirds  of  the  Democratic 
braves  have  lashed  out  of  their  camp  an  obstinate 
third,  so  that  the  regular  Democracy,  this  year, 
shall  stand  for  Silver  only. 

The  Silver  Party  has  an  advantage  in  promptly 
awakening  enthusiasm  by  claiming  to  be  able  to 
right  an  alleged  wrong,  and  to  rescue  all  who  suffer 
from  it— the  alleged  "  Crime  of  1873." 

The  author  is  sure,  however,  that  a  vast  majority 
of  the  American  people  will  be  found  on  the  right 
side  in  the  final  contest,  if  every  day  of  the  hundred 
intervening  days  be  put  to  the  best  uses.  Within 
this  short  time  millions  of  voters  must  be  taught 
the  truths  of  financial  and  monetary  science. 
NEW  YORK,  July,  1896. 


CONTENTS. 


MOB 

PREFACE iii 

CHAPTER 

I. — THE  EVOLUTION  OF  MONEY,  TRADE, 

AND  FINANCE i 

II.-— THE  MOVEMENTS  OF  PRICES        .         .     23 
III. — INDIA  AND  HER  SILVER  RUPEE  .         .     49 
IV. — PRICES  AND  WAGES      .         .        .         .62 
V. — PRICES,   WAGES,   AND   LABOR-SAVING 

MACHINERY      .         .         .         .         .80 
VI. — "  THE  DEBTOR  CLASS  "        .        .        .  101 
VII. — "  THE  BALANCE  OF  TRADE  "—FOREIGN 

EXCHANGE        .        .        .        .        .114 
VIII. — FOREIGN  EXCHANGE  UNDER  NORMAL 

AND  UNDER  ABNORMAL  CONDITIONS,.  132 

IX. — DISCUSSION     WITH     REPRESENTATIVE 

ADVOCATES  OF  SILVER     .         .         .144 
X. — THE  DISCUSSION  CONCLUDED       .         -158 
XI. — "ULTIMATE  REDEMPTION  "          .         .175 
XII. — THE  OLD  VOLUME-OF-MONEY  THEORY,  183 
XIII. — SUPPLEMENTAL  —A  RETROSPECT— THE 
PANIC    OF    1893 — REVENUE    DEFI- 
CIENCY— FINANCIAL  FLOUNDERING 
— BOND  -  ISSUING  —  PAPER  MONEY 
REDUNDANCY — THE  CIRCULATION — 

Bl  -  METALLISM  —  THE      FINANCIAL 

SITUATION  IN  189 G — THE  ELECTION 
— CONCLUSION  20% 


^ONEY,  SILVER,  AND  FINANCE. 


CHAPTER  I. 

THE  EVOLUTION  OF  MONEY,  TRADE,  AND 
FINANCE. 

IN  the  dawn  of  trade  and  civilization — • 
and  I  mention  trade  first  because  civiliza- 
tion has  been  supported  by  trade,  although 
sometimes  affecting  to  despise  it — there 
arose  a  necessity  for  money,  and  different 
communities  groped  about  until  each  found 
its  most  available  substance.  Adam  Smith 
tells  us  that  in  the  rude  ages  of  society 
cattle  were  the  common  instrument  of  com- 
merce, the  armor  of  Diomede,  according  to 
Homer,  costing  nine  oxen,  while  that  of 
Glaucus  cost  a  hundred.  Salt  has  been  used 
as  money  in  Abyssinia  ;  a  species  of  shells 
(cowries)  in  some  parts  of  the  coast  of 


2  Money,  Silver,  and  Finance. 

India ;  dried  cod  in  Newfoundland ;  to- 
bacco in  Virginia ;  sugar  in  the  West  In- 
dies ;  hides,  leather,  furs,  etc.,  elsewhere. 
Circumstances  too  have  forced  the  use  of 
inferior  money  upon  people  wiic  ikad 
grown  accustomed  to  better ;  for  instance, 
our  colonists  along  the  coasts  of  Long 
Island  Sound  adopted  the  money  of  the 
Indians  and  made  wampum  (polished  beads 
made  of  parts  of  the  periwinkle  and  the 
clam-shell)  a  legal  tender  for  sums  up  to 
twelvepence,  and,  by  custom,  made  it  the 
prevailing  currency.  The  superiority  of 
the  white  man  was  shown,  however,  by  his 
ability  to  counterfeit  this  wampum,  as 
Professor  Sumner  dryly  mentions  in  his 
History  of  American  Currency. 

It  is  a  long  way  from  the  many  articles 
named,  and  from  the  irregular  pieces  of 
metal  which  almost  everywhere  superseded 
them,  to  a  five-dollar  gold  piece,  a  tAventy- 
five-cent  silver  piece,  a  nickel  five-cent 
piece,  and  a  bronze  or  copper  cent,  or 
to  a  Bank-of-Englaud  five-pound  note,  and 
the  car  of  progress  has  frequently  tumbled 
into  a  paper-concealed  ditch ;  but  com- 


Evolution  of  Money,  Trade,  and  Finance.   3 

paratively  perfect  forms  of  money  and  its 
substitutes  have  at  length  been  evolved, 
and  the  whole  process  by  which  copper, 
bronze,  nickel,  silver,  gold,  and  paper  have 
taken  relative  positions  has  been  strictly 
evolutionary,  the  actions  of  governments 
having  been  forced  upon  them  by  irresist- 
ible natural  law.  Copper,  bronze,  and 
nickel  have  proved  their  suitability  for 
small  change  and  their  unsuitability  for 
large  coinage.  Silver  has  proved  its  suit- 
ability for  dimes,  quarters,  and  half-dollars 
and  its  unsuitability  for  dollars  or  cer- 
tainly for  any  larger  coin.  Gold  has 
proved  its  unsuitability  for  smaller  coins 
than  quarter-  or  half-eagles  ;  and,  for  the 
ordinary  use  of  money,  from  hand  to  hand, 
gold  has  been  proved  inferior  to  paper. 
But  gold  has  taken  the  position  of  a  base 
for  paper  money  and  for  national  and 
international  exchange  of  commodities. 

The  displacement  of  silver  by  gold,  as  a 
standard  measure  of  value  among  the 
great  commercial  nations,  has  been  as  truly 
evolutionary  as  has  been  the  displacement, 
as  money,  of  unsuitable  articles :  the  im- 


4  Money,  Silver,  and  Finance. 

portaut  cause  was  the  cheapening  of  sil- 
ver through  over-production  and  through 
a  natural  decline  in  the  cost  of  production. 
Supply  exceeded  demand,  at  or  near  cur- 
rent  prices,  About  the  year  1873,  silver 
became  so  plentiful  in  the  United  States 
that  it  began  to  circulate  side  by  side  with 
paper  money,  although  gold  was  then  at  a 
premium  of  say  ten  per  cent.  In  Europe, 
the  cheapening  of  silver  was  helped  on  by 
the  belief  of  individual  governments  that 
silver  would  displace  gold  in  that  country 
which  should  continue  to  largely  coin  sil- 
ver,—  Gresham's  Law,1  the  economic  law 
under  which  an  inferior  kind  of  money 
tends  to  drive  from  a  country  a  superior 
kind  of  money,  being  well  understood  over 
there.  It  was  seen  that  if  a  large  quantity 
of  silver  were  coined,  after  its  bullion 
value  had  declined,  gold  coins  might  be 
melted  down  and  then  sold  by  weight.  It 
is  said  that  Germany  thought  it  a  good 
time  to  put  its  money  upon  a  safe  gold 
basis  and  to  force  France  to  drift  upon 
the  silver  basis.  Then  too,  a  government 
which  should  be  the  quickest  to  reduce 

1  Discovered  by  Sir  Thomas  Gresham  (1519-1579). 


Evolution  of  Money,  Trade,  and  Finance.  5 

the  quantity  of  its  silver  coin  in  circula- 
tion, therefore  the  quickest  to  make  room 
for  gold  to  circulate,  might  succeed  in 
attracting  gold  from  other  countries.  Eng- 
land, of  course,  could  not  afford  to  be 
behindhand,  for  bills  of  exchange  are 
drawn  upon  London  in  all  quarters  of  the 
globe,  and  every  one  of  these  bills  is  pay- 
able in  gold,  the  commercial  supremacy  of 
England,  indeed,  depending  upon  the 
world's  belief  that  she  has  sufficient  gold 
to  meet  all  possible  demands,  and  upon 
the  world's  knowledge  that  the  note  of 
the  Bank  of  England  has  commanded  gold 
for  three  quarters  of  a  century.  The  pa- 
thetic view  of  the  actions  of  European 
governments  in  stopping  the  coining  of 
silver,  prompted  by  fear  that  a  continuance 
of  silver-coining  might  lead  to  the  actual 
demonetization  of  gold  may  be  found  in 
the  minority  report  of  the  Committee  on 
Coinage,  Weights,  and  Measures,  on  the 
Senate  Silver  Bill,  second  session,  Fifty- 
first  Congress.  Silver  might  have  main- 
tained its  parity  with  gold  if  nobody  had 
given  silver  a  kick,  thinking  it  would  go 


6  Money )  Silver,  and  Finance. 

down  anyway  ;  just  as  a  failed  bank  might 
not  have  succumbed  if  nobody  had  started 
a  rumor  as  to  its  solvency  and  no  depositor 
had  been  mean  enough  to  start  "  a  run." 

The  fluctuating  and  declining  value  of 
silver  during  the  past  twenty  years,  and 
the  fear  that  an  unlimited  quantity  might 
or  may  be  produced,  coupled  with  the 
stability  of  gold  during  the  period  since 
the  discovery  of  the  Californian  supply,1 
and  the  belief  that  all  g;old-niines,  together, 

O  '  O  / 

cannot  be  sufficiently  prolific  to  affect  the 
value  of  gold,  have  made  gold  the  standard 
of  value  for  great  commercial  nations,  and 
have  served  to  fasten  silver  upon  the  weaker 
commercial  nations  as  their  standard  of 
value.  If  a  country  trading  with  England 
or  the  United  States  would  take  silver  it 
would  be  sure  to  get  it,  for  everybody  pays 
debts  with  as  cheap  money  as  creditors  will 
take.  If  a  country  persisted  in  coining 
gold,  and  in  refusing  to  coin  silver,  that 
country  could  not  have  any  other  country's 
surplus  of  silver  dumped  upon  it.  Pos- 
sessing inexhaustible  mines  of  silver,  we 
favor  the  use  of  this  metal  as  a  standard  of 

1  And,  later,  the  South  African  supply. 


Evolution  of  Money,  Trade,  and  Finance.   7 

value ;  but  it  cannot  be  to  our  interest  to 
lose  sight  of  the  fact  that  silver  is  already 
discredited  by  the  commercial  world, — not 
merely  by  governments,  some  of  which 
might  be  induced  to  change,  but  by  com- 
merce itself,  which  selects  for  itself  the 
best  standard  of  value.  As  well  say  to  the 
ivorld,  We  have  plenty  of  wood  in  this 
country,  we  will  build  a  wooden  navy,  and 
jhen  you  will  discard  iron-clads;  or,  We 
will  give  up  using  electricity,  and  then  you 
will  go  back  to  steam  and  to  candles  and 
oil ;  as  well  take  such  a  position,  as  to  say 
that  the  world  would  follow  our  example 
if  we  should  abandon  gold  and  fully  adopt 
silver  for  our  standard  of  value.  Evolu- 
tion is  as  irresistible  in  the  financial  and 
commercial  world  as  everywhere  else; 
evolution  has  selected  gold,  and  has  re- 
jected silver;  and  all  we  can  do  in  the 
matter  is  to  decide  whether  we  shall  take 
as  our  standard  the  selected  metal  or  the 
rejected  metal, — that  is,  stand  with  the 
great  nations  or  with  the  weak  nations. 
Wampum  was  perfect  money  for  the  In- 
dians, and  was  a  fair  sort  for  the  colonists, 


8  Money,  Silver,  and  Finance. 

but  was  of  no  use  in  foreign  commerce. 
Wampum  cost  time  and  labor  to  produce, 
but  Europe  did  not  want  it ;  and  arguments 
to  prove  to  Europeans  their  own  perversity 
fall  about  equally  flat  whether  in  favor  of 
wampum  or  of  silver,  excepting,  of  course, 
that  Europe  wants  some  silver,  whereas  it 
never  wanted  any  wampum.  Two  facts 
overcome  all  arguments ;  the  production  of 
silver  has  too  largely  increased,  and  the 
price  of  silver  has  too  greatly  declined. 

Statistics  show  how  naturally  silver  has 
lost  caste  as  a  standard  of  value.  Up  to 
1870  the  world's  annual  production  was 
less  than  half  so  great  as  the  annual  pro- 
duction of  gold  (coinage  value),  and  there- 
fore the  price  of  silver  was  above  one  dol- 
lar and  thirty  cents  per  ounce,  the  parity  of 
the  two  metals  being  close  to  fifteen  and 
one  half  ounces  of  silver  to  one  ounce  of 
gold.  But  while  the  average  production 
of  gold  has  not  materially  changed,'  that  of 
silver  has  so  largely  increased  that  it  is  now 

1  NOTE  TO  FOURTH  EDITION.— See  table  on  page  160  and  also  the 
foot  note. 


Evolution  of  Money,  Trade,  and  Finance,  g 

about  one  third  greater  than  the  produc- 
tion of  gold.  There  are  grounds  for  be- 
lieving, too,  that  gold  will  be  still  further 
distanced.  Under  the  circumstances,  the 
supply  of  silver  far  outrunning  the  de- 
mand, it  is  not  unnatural -that  silver  should 
be  worth,  to-day,  less  than  one  dollar  per 
ounce,  and  that  the  ratio  of  value  should 
be  about  twenty -one  or  twenty-two  to  one. 
Sixteen  to  one  is  the  United  States  coinage 
parity,  corresponding  with  $1.2929  per 
ounce  for  silver, — say  thirty  per  cent,  above 
the  world's  price.1 

Trade  and  civilization  could  hardly  have 
developed  beyond  a  primitive  state  before 
the  business  of  banking  must  have  come 
into  existence,  crude,  but  essentially  similar 
to  modern  banking,  the  intricacies  of  to- 
day's financial  operations  corresponding  to 
the  intricacies  of  to-day's  trade.  And  as  a 
large  portion  of  the  inhabitants  of  the 
globe  would  have  frozen  or  have  starved, 
or  never  would  have  come  into  being,  if 
the  world  had  not  learned  to  use  money, 
simple  barter  being  wholly  inadequate  to 
perform  the  smallest  fraction  of  the  ex- 

1  In  1896  the  price  of  silver  is  about  sixty-eight  cents  per  ounce, 
the  market  value  ratio  to  gold  being  about  31  to  1. 


lo          Money,  Silver,  and  Finance. 

change  of  products,  so  financial  systems  are 
absolutely  necessary  to  the  business  of  the 
present  time,  the  world's  population  now 
largely  depending  for  the  continuance 
of  its  existence  upon  the  success  of  the 
schemes  of  dead  and  living  financiers.  In 
other  words,  the  needs  of  the  world  out- 
stripped the  greatest  volume  of  exchanges 
possible  by  barter,  next  the  greatest  vol- 
ume possible  by  both  barter  and  the  use 
of  money,  and  now,  apparently,  the  volume 
of  exchanges  is  limited  by  the  degree  of 
perfection  attained  in  financial  science, 
transportation  problems  being  often  only 
financial  problems. 

The  ancient  planters  of  rice  and  wheat 
must  have  been  short  of  money  while  their 
crops  were  growing,  for  then  the  planters 
would  have  been  obliged  to  support  their 
hands  while  receiving  nothing ;  at  and  be- 
fore harvest-time  a  money-lender  must  have 
been  as  useful  as  a  banker  of  our  day,  who 
annually  sends  money  westward,  "  to  move 
the  crops  "  ;  and  immediately  after  the  sell- 
ing of  a  crop  the  ancient  producers  would 
have  been  in  position  to  lend  their  surplus 


Evolution  of  Money,  Trade,  and  Finance.  1 1 

of  money,  for  the  sake  of  interest.  The 
dealers  in  rice,  wheat,  or  other  produce 
would  need  to  borrow  money  when  pur- 
chasing a  crop,  and  would  have  money  to 
lend  after  the  crop  had  been  marketed. 
Raiders  or  traders,  when  starting  upon  an 
expedition,  would  need  plenty  of  ready 
money,  and  upon  their  return  might  find  it 
more  profitable  to  borrow  against  a  heavy 
stock  of  ivory  than  to  sell  it  at  once.  The 
weak  or  timid  persons  in  a  primitive  com- 
munity would  like  to  deposit  a  portion  of 
their  savings  in  the  hands  of  a  strong  and 
trustworthy  man,  especially  if  such  a  man 
would  pay  something  for  the  use  of  the 
money.  A  rich,  strong,  trustworthy  man, 
either  old  or  willing  to  lead  a  quiet  life, 
would  drift  into  the  banking  business  for 
power,  profit,  honor,  or  simply  to  oblige  his 
friends  and  neighbors.  Indeed,  so  naturally 
does  the  banking  business  come  up  that, 
without  offering  further  proof,  we  may 
assume  that  this  business  has  been  neces- 
sary in  all  the  steps  of  trade  and  civiliza- 
tion. Certainly  it  is  so  necessary  in  our 
modern  world  that  wherever  we  find  a 


1 2          Money,  Silver ',  and  Finance. 

large  village  which  has  no  bank  or  banker, 
nor  one  in  proximity,  we  are  pretty  sure  to 
find  a  community  that  is  both  poor  and 
ignorant. 

Of  tremendous  importance  for  good  and 
evil  has  been  and  is  the  financial  con- 
trivance which  we  know  as  paper  money  ; 
properly,  a  receipt  for  real  money  and  a 
promise  to  pay  it  back  on  demand.  When 
one  person  saw  fit  to  trust  another  with 
money  or  other  valuable  thing,  either  for 
safe-keeping  or  both  safe-keeping  and  inter- 
est, the  first  person  would  be  glad  to  have 
a  receipt.  And  if  the  banker  were  well 
known,  his  receipt  might  be  passed  by  the 
first  person  to  a  second,  in  exchange  for 
merchandise.  But  the  first  person  would 
want  probably  a  number  of  things,  belong- 
ing to  a  number  of  people,  and  not  want 
all  the  things  at  once ;  and  he  would  there- 
fore ask  the  banker  for  a  number  of  re- 
ceipts, each  for  a  convenient  portion  of  the 
whole  deposit.  And,  as  business  grew,  the 
banker,  for  his  own  convenience,  would 
keep  in  readiness  a  great  number  of  re- 
ceipts, for  small  and  large  amounts — that 


Evohttion  of  Money,  Trade,  and  Finance.    1 3 

is  to  say,  he  would  be  ready  to  issue  to  the 
public  paper  money,  in  small  and  large  de- 
nominations. People  like  paper  money  be- 
cause of  its  lack  of  weight ;  but  the  benefit 
to  the  issuer  conies  only  in  issuing  an 
amount  which  exceeds  the  sum  of  real 
money  that  is  supposed  to  be  represented. 
If  a  banker  issue  one  hundred  thousand 
dollars  in  paper  money  in  receipt  for  one 
hundred  thousand  dollars  in  real  money, 
and  keep  the  real  money  in  his  vault,  no 
profit  can  result.  But  if  he  lend  seventy- 
five  thousand  dollars  of  the  real  money  on 
interest,  trusting  that  the  public  will  not 
demand  payment  for  more  than  twenty-five 
thousand  dollars  of  his  paper,  his  profit  be- 
comes quite  clear ;  and  it  is  equally  clear 
that  the  community  has  the  use  of  a  circu- 
lating medium  seventy-five  thousand  dollars 
greater  than  before.  Given  the  good  faith 
of  the  issuer,  the  question  whether  paper 
money  be  a  blessing  or  a  curse  must  always 
have  been  mainly  a  question  of  quantity, 
not  of  exact  but  of  relative  quantity, — rela- 
tive to  the  real  money  in  the  vaults  of  the 
issuer,  relative  to  the  customs  of  the  public 


1 4          Money,  Silver,  and  Finance. 

in  the  matter  of  carrying  money,  relative 
to  the  public's  belief  in  the  wealth  back  of 
the  issuer,  relative  to  the  state  of  trade, 
present  and  prospective  and  foreign  and 
domestic,  relative  to  the  probability  or  im- 
probability of  happenings  which,  in  a  mo- 
ment, would  change  confidence  into  panic 
and  bring  to  the  doors  of  the  issuer  the 
holders  of  most  of  his  paper,  crying  loudly 
for  gold.  In  truth,  the  line  between  safety 
and  danger  in  a  volume  of  paper  money 
moves  forward  and  backward  with  chan- 
ging circumstances,  and  holders  have  always 
been  willing  to  hold  when  they  thought 
they  were  not  obliged  to  hold,  and  have 
always  demanded  payment  when  they 
thought  that  payment  might  be  refused. 

When  governments  took  to  themselves 
the  right  to  issue  paper  money,  the  drawing 
of  a  danger  line  became  still  more  difficult, 
because  of  a  prevailing  notion  that  the 
value  of  money  rests  in  the  governmental 
stamp  upon  it.  Governments  have  put 
forth  excessive  volumes  without  knowing 
that  there  was  any  danger,  and  with  an 
ease  which  has  been  equalled  only  by 


Evolution  of  Money,  Trade,  and  Finance.   15 

the  difficulty  of  subsequent  withdrawals. 
Whether  given  a  legal-tender  character  or 
not,  paper  money  paid  to  troops,  for  foodT 
clothing,  weapons,  am  munition,  or  for  other 
things,  readily  finds  its  way  into  circula- 
tion. And  with  a  large  quantity  flowing 
from  the  national  treasury,  people  appear 
to  be  prosperous,  demagogues  applaud,  and 
safety  is  already  well  behind  before  any 
exportation  or  any  hoarding  of  gold  acts  as 
a  danger  signal.  The  test  of  relative  quan- 
tity applies  to  government  notes  as  well  as 
to  bank-notes  ;  but  the  former  have  the 
advantage  of  being  known  by  the  whole 
instead  of  by  sections  of  a  community.  It 
is  important  that  A,  in  the  East,  trading 
with  B,  in  the  West,  should  agree  to  give 
or  take  the  kind  of  money  that  B  has  in 
mind ;  or,  for  example,  that  C,  in  the 
South,  trading  with  D,  in  the  North, 
should  not  be  compelled  to  receive  bank- 
notes which  are  bankable  only  in  the 
North,  or  be  permitted  to  settle  a  debt 
with  the  bank-notes  which  are  bankable 
only  in  his  own  section.  Governmental 
safeguard,  guaranty,  or  responsibility  is 


1 6          Money,  Silver,  and  Finance. 

better  than  the  individual  responsibility  of 
widely  separated  banks  and  bankers ;  but 
whether  our  present  paper  money  is  better 
than  would  be  paper  money  which  might, 
under  proper  supervision,  be  issued,  as 
pi'oposed  by  Edward  Atkinson,  by  the 
New  York  Clearing-House  Association 
and  by  other  aggregations  of  banks  and 
bankers,  is  another  question.  Such  paper 
money  might  be  changed  in  volume  from 
time  to  time,  to  conform  to  the  natural 
changes  in  the  state  of  trade  and  com- 

o 

merce  ;  and  if  the  issuers  were  given  the 
right  to  raise  and  lower  the  rate  of  interest, 
somewhat  as  the  Bank  of  England  moves 
its  rate,  they  would  possibly  be  able  to 
give  us  better  paper  money,  because  elastic 
in  volume,  than  we  now  possess.  I  do  not 
think,  however,  that  any  new  kind  of  paper 
money  need  be  recommended  in  this  volume. 
Vastly  more  important  to  the  commercial 
world  than  paper  money  are  the  other  finan- 
cial contrivances  called  checks,  drafts,  notes, 
bills  of  exchange,  etc. ;  for,  besides  having 
no  appreciable  weight,  they  can  be  made 


Evolution  of  Money,  Trade,  and  Finance.    1 7 

safe  in  transmission.  So  used  to  these  sub- 
stitutes for  money  has  trade  grown  that 
millions  of  people,  every  day,  agree  to  re- 
ceive or  pay  money  without  thinking  of 
any  money  more  real  than  one  of  these 
substitutes,  and  without  stopping  to  con- 
sider that  should  one  tenth  of  the  traders 
carry  out  their  contracts  literally  the  other 
nine  tenths  would  necessarily  fail  to  carry 
out  theirs.  But  this  is  far  from  being  an 
unfortunate  thing :  it  is  but  a  fact  in  evi- 
dence that  the  volume  of  exchanges  of  the 
world's  commodities  is  so  great  that  money 
does  not  suffice  for  a  tenth  of  the  move- 
ment ;  while,  of  course,  it  is  true  that  the 
greater  the  facilities  for  moving  the  world's 
commodities,  the  better  for  everybody. 
Banks  and  individuals  depend  for  their 
solvency  upon  the  willingness,  practically, 
of  everybody  to  forego  his  rights;  but  to 
find  fault  with  this  is  equivalent  to  finding 
fault  with  the  growth  of  trade.  If  con- 
sumers of  American  oil,  cottons,  and  hard- 
ware in  remote  parts  of  the  world  should 
send  us  money  to  pay  for  our  goods;  if 
British  purchasers  of  American  stocks. 


1 8          Money,  Silver,  and  Finance. 

bonds,  wheat,  cotton,  meat,  should  pay  us 
actual  money ;  if  American  buyers  of  silk 
should  send  money  to  France,  or  American 
buyers  of  coffee  and  rubber  should  send 
money  to  Brazil ;  if  New  York  buyers  of 
provisions  should  send  money  to  Western 
producers,  and  Western  consumers  of  manu- 
factured articles  send  money  to  Eastern 
manufacturers, — the  bulk  of  the  world's 
money  ^vould  always  be  in  transit.  And 
this  is  equivalent  to  saying  that  the  ex- 
changes of  the  world's  commodities  would 
not  take  place, — that  we  should  be  in  that 
state  of  barbarism  in  which  each  country 
uses  only  its  own  productions. 

In  one  breath  we  may  fairly  speak  of 
the  evolution  of  money,  of  trade,  of  finance, 
and  of  civilization ;  for  evolution  in  each 
has  been  dependent  upon  the  other  three  ; 
and  to-day  fair  tests  of  the  state  of  civili- 
zation in  any  country  are  the  kind  of  money 
which  it  uses,  the  development  of  its  trade, 
and  the  condition  and  extent  of  its  banking 
or  credit  system.  Silver  is  the  money  of 
India  and  China,  and  we  find  in  those 
countries  that  the  people  are  poor  and  ig- 


Evolution  of  Money,  Trade,  and  Finance.  1 9 

norant — so  poor  that  famines  recur,  that  the 
average  weekly  wage  is  not  an  inconven- 
iently heavy  weight  of  this  metal,  and  that 
the  average  amount  in  people's  pockets  is 
not  likely  to  burst  them ;  so  ignorant  that 
pieces  of  paper  could  hardly  be  expected 
to  pass  from  hand  to  hand  like  real  money ; 
so  ignorant  that  the  foreign  trade  of  these 
countries  is  conducted  mostly  by  foreigners 
on  the  coasts,  foreigners  alone  understand- 
ing how  to  use  banking  facilities.  Exactly 
opposite  is  the  development  reached  in  the 
United  States :  paper  money,  whether,  on 
its  face,  redeemable  in  "gold,"  in  "coin," 
or  in  "silver,"  is  preferred  to  the  intrinsi- 
cally valuable  metals,  and  the  paper  money, 
which  is  redeemable  in  "  dollars,"  circulates 
alongside  those  "  dollars  "  which  have  been 
given  a  legal-tender  character ;  our  people 
are  so  well  off  that  pocket-money  would  be 
burdensome  if  it  were  all  in  silver;  the 
average  weekly  wage-rate  is  too  great  to  be 
paid  in  silver,  if  the  convenience  of  either 
employers  or  employees  is  to  be  considered  ; 
and  we  have  in  this  country  such  a  highly 
developed  system  of  banking  and  credit 


2O          Money,  Silver,  and  Finance. 

that  nearly  all  of  the  exchange  of  com- 
modities among  ourselves,  and  between  us 
and  foreigners,  is  done  without  more  than 
a  nominal  use  of  money.  England  forces 
gold  and  silver  to  circulate  in  England  by 
not  permitting  the  people  to  have  paper 
money  in  denominations  below  five  pounds 
— say  twenty-five  dollars, — and  France 
forces  Frenchmen  to  use  gold  and  silver  by 
not  giving  Frenchmen  denominations  of 
paper  money  below  fifty  francs — say  ten 
dollars ;  Germany  similarly  treats  her 
people ;  but  Americans  are  used  to  the 
convenience  of  paper  money  down  to  single 
dollars,  and  this  convenience  certainly  will 
never  be  given  up,  what  money  English- 
men, Frenchmen,  Germans,  Indians,  or 
Chinamen  carry  in  their  pockets  being  un- 
important to  us,  at  least  as  an  argument. 
No  party  will  ever  be  sufficiently  powerful 
to  force  Americans  to  carry  silver  instead 
of  paper. 

But  if  silver  cannot  be  made  to  circulate, 
may  we  not  use  it  as  a  base  for  paper 
money  ?  Why  should  we  ?  We  have  now 
the  gold  base  in  common  with  the  great 


Evolution  of  Money,  Trade,  and  Finance.  2 1  - 

European  nations,  and  we  trade  mostly 
with  them,  or  when  trading  with  others, 
we  necessarily,  as  a  rule,  agree  to  pay  or 
to  accept  payment  in  London  exchange — 
that  is,  we  trade  on  the  gold  base.  Gold 
has  proved  itself  a  more  stable  base  than 
silver;  and  what  can  be  more  important 
to  our  stupendous  superstructure  of  credit 
than  an  immovable  foundation  ?  Do  we 
prefer  to  build  upon  quicksand?  Or,  in 
broadening  the  foundation  of  a  structure, 
is  it  well  to  use  rock  for  one  portion  of  the 
foundation  and  sand  for  another  portion? 
No  stronger  proofs  of  the  height  of  civili- 
zation in  this  country  can  be  offered  than 
that  we  use  financial  contrivances  so  exten- 
sively, and  that  gold  itself  is  not  used  to 
the  extent,  possibly,  of  even  one  per  cent, 
of  our  volume  of  business,  although  in 
every  transaction  the  buyer  and  the  seller, 
when  stopping  to  think  at  all,  think  of  the 
gold  value  of  the  money  mentioned.  Is  it 
the  duty  of  Congress,  then,  to  say  to  the 
people  :  All  this  is  wrong ;  you  must  carry 
more  paper  and  silver  in  your  pockets; 
you  must  use  checks  and  drafts  less,  and 


2  2          Money,  Silver,  and  Finance. 

you  must  use  silver  more ;  you  must  con- 
sider the  condition  of  our  silver  miners,  and 
favor  our  being  upon  a  wabbling  base — 
part  gold,  part  silver  ?  Rather,  is  it  not 
the  duty  of  Congress  to  recognize  that 
nearly  all  the  business  of  this  country  is, 
and  necessarily  must  be,  carried  on  by 
means  of  some  form  of  credit,  and  therefore 
it  must  be  of  the  greatest  importance  to 
everybody  to  be  able  to  feel  that  the  firm 
foundation  of  gold-measured  or  gold-valued 
wealth  is  beneath  it  all  ?  Congress  cannot 
cause  us  to  be  born  again,  and  into  the 
Hindu,  Chinese,  Japane.se,  or  even  into  the 
Mexican  or  South  American  silver-handling 
type ;  but,  through  the  operation  of  laws 
which  favor  silver,  so  much  of  the  kind  of 
money  which  is  in  every  way  unsuited  to  us 
may  be  forced  into  the  foundations  of  our 
banking  and  credit  system,  that  there  may 
be  shaken  or  overthrown  this  marvellous 
structure,  which  now  so  well  serves  our 
vast  and  intricate  exchange  of  commodities, 


1896.  The  United  States  Government  strained  its  credit,  in  favor- 
ing silver  for  fifteen  years,  to  November,  1893,  but  created  no  silver- 
handling  habit  among  the  people. 


CHAPTER  II. 

THE   MOVEMENTS    OF    PKICES. 

THE  upward  and  downward  courses  of 
trade  and  prices,  recurring  not  with  regu- 
larity but  with  sufficient  certainty  to  form 
a  basis  for  shrewd  guessing,  are  yet  consid- 
ered inexplicable,  at  least  by  one  of  our 
greatest  political  economists.  According 
to  Mr.  David  A.  Wells,1  if  I  draw  a  correct 
inference,  everybody  is  cognizant  of  the 
undulatory  character  of  trade  and  price 
movements,  but  nobody  can  account  for  it. 
The  what-has-been-must-be  theory  is  the 
sum  of  the  general  knowledge  that  buoy- 
ancy follows  depression,  or  vice  versa,  and 
that  a  panic  is  apt  to  come  after  a  period 
of  over-confidence.  "Neither  can  it  be 
conceived  how  periodical  changes  in  prices 
can  result  from  any  possible  law  of  nature, 
unless  it  can  be  shown  that  such  laws  exist 


1  Recent  Economic  Changes. 
23 


24          Money \  Silver,  and  Finance. 

and  operate  with  uniformity  on  the  human 
mind  and  on  the  development  of  the  hu- 
man intellect,  which  has  not  yet  been 
done." 

I  feel  reluctance  in  stating  that  I  do  not 
agree  with  Mr.  Wells,  but  I  think  it  im- 
portant to  show,  if  I  can,  that  such  a  "  law 
of  nature  "  is  exactly  what  Mr.  Herbert 
Spencer  discovered  and  fully  explained.1 
The  great  philosopher  pointed  out  the  un- 
dulatory  character  of  all  motion,  with  nu- 
merous illustrations  from  the  fluttering  of 
a  vessel's  pennant  to  the  course  of  a  planet 
or  to  the  rises  and  falls  of  activities  in  the 
human  body.  Mr.  Spencer  says :  "  Passing 
from  external  to  internal  changes,  we  meet 
with  this  backward  and  forward  movement 
under  many  forms.  In  the  currents  of 
commerce  it  is  especially  conspicuous. 
Exchange  during  early  times  is  almost 
wholly  carried  on  at  fairs,  held  at  long 
intervals  in  the  chief  centres  of  population. 
The  flux  and  reflux  of  people  and  com- 
modities which  each  of  these  exhibits  be- 
comes more  frequent  as  national  develop- 

1  First  Principles,  chapter  on  The  Rhythm  of  Motion. 


The  Movement  of  Prices.  25 

ment  leads  to  greater  social  activity.  The 
more  rapid  rhythm  of  weekly  markets  be- 
gins to  supersede  the  slow  rhythm  of  fairs. 
And  eventually  the  process  of  exchange 
becomes  at  certain  places  so  active  as  to 
bring  about  daily  meetings  of  buyers  and 
sellers — a  daily  wave  of  accumulation  and 
distribution  of  cotton,  or  corn/  or  capital. 
If  from  exchange  we  turn  to  production 
and  consumption,  we  see  undulations,  much 
longer  indeed  in  their  periods,  but  almost 
equally  obvious.  Supply  and  demand  are 
never  completely  adapted  to  each  other,  but 
each  of  them  from  time  to  time  in  excess, 
leads  presently  to  an  excess  of  the  other. 
Farmers  who  have  one  season  produced 
wheat  very  abundantly,  are  disgusted 
with  the  consequent  low  price ;  and  next 
season,  sowing  a  much  smaller  quantity, 
bring  to  market  a  deficient  crop,  whence 
follows  a  converse  effect.  Consumption 
undergoes  parallel  undulations  that  need 
not  be  specified.  The  balancing  of  sup 
plies  between  different  districts,  too,  entails 
analogous  oscillations.  A  place  at  which 

1  In  England  corn  means  wheat,  rye,  barley,  and  corn  (maize). 


26          Money,  Silver,  and  Finance. 

some  necessary  of  life  is  scarce  becomes  a 
place  to  which  currents  of  it  are  set  up 
from  other  places  where  it  is  relatively 
abundant,  and  these  currents  from  all  sides 
lead  to  a  wave  of  accumulation  where  they 
meet — a  glut :  whence  follows  a  recoil — a 
partial  return  of  the  currents.  But  the 
undulatory  character  of  these  actions  is 
perhaps  best  seen  in  the  rises  and  falls  of 
prices.  These,  given  in  numerical  measures 
which  may  be  tabulated  and  reduced  to 
diagrams,  show  us  in  the  clearest  manner 
how  commercial  movements  are  com- 
pounded of  oscillations  of  various  magni- 
tudes. The  price  of  consols,  or  the  price 
of  wheat,  as  thus  represented,  is  seen  to 
undergo  vast  ascents  and  descents  whose 
highest  and  lowest  points  are  reached  only 
in  the  course  of  years.  These  largest 
waves  of  variation  are  broken  by  others 
extending  over  periods  of  perhaps  many 
months.  On  these  again  come  others 
having  a  week  or  two's  duration.  And 
were  the  changes  marked  in  greater  detail, 
we  should  have  the  smaller  undulations 
that  take  place  each  day,  and  the  still 


The  Movement  of  Prices.  2  7 

smaller  ones  which  brokers  telegraph  from 
hour  to  hour.  The  whole  outline  would 
show  a  complication  like  that  of  a  vast 
ocean-swell,  on  whose  surface  there  rise 
large  billows,  which  themselves  bear  waves 
of  moderate  size,  covered  by  wavelets  that 
are  roughened  by  a  minute  ripple. 

»•;*'•'.'-•#»•.••''•'•* 

"  Thus,  then,  rhythm  is  a  necessary  char- 
acteristic of  all  motion.  Given  the  co- 
existence everywhere  of  antagonistic  forces 
—a  postulate  which,  as  we  have  seen,  is 
necessitated  by  the  form  of  our  experience 
— and  rhythm  is  an  inevitable  corollary 
from  the  persistence  of  force." 

The  expressions  which  are  commonly 
heard  among  traders  and  speculators : 
"  The  market  is  tired,"  "  It  can't  go  one  way 
all  the  time,"  "What  goes  up  must  come 
down,"  "  Look  out  for  a  reaction,"  "  The  tide 
must  be  nearly  ready  to  turn,"  and  hun- 
dreds of  others  of  a  similar  nature  are 
acknowledgments  of  the  force  of  a  funda- 
mental law,  and  it  is  safe  to  say  that  any 
business-man  who  goes  along  without  rec- 
ognizing, consciously  or  unconsciously,  this 


28          Money,  Silver,  and  Finance. 

all-governing  law  is  likely  to  come  to  grief. 
He  it  is  who  "goes  clamming  at  high  tide," 
who  buys  vacant  lots  at  the  u  top  of  a 
boom,"  who  "  gets  left "  with  a  big  stock 
when  buyers  become  scarce  and  who  has 
nothing  to  sell  when  everybody  wants  to 
buy. 

Theoretically  there  is  no  difficulty  what- 
ever in  accounting  for  the  fact  that  prices 
and  activities  rise  and  fall.  The  undula- 
tory  character  of  trade  movements  corre- 
sponds with  all  known  motion,  and  it  is  no 
more  the  duty  of  the  political  economist  to 
inquire  further  into  the  why  and  where- 
fore of  the  phenomenon  than  it  is  his 
business  to  ask  why  over-exertion  makes 
him.  tired,  why  a  current  makes  eddies, 
why  exaltation  leads  to  depression,  why 
scarcity  leads  to  glut  and  low  prices,  and 
glut  and  low  prices  to  scarcity  and  high 
prices,  or  why  force  and  resistance  have 
any  place  in  nature. 

Recognizing  that  rhythm  in  motion  is  all- 
prevading,  although  perhaps  never  think- 
ing of  it  as  rhythmical,  the  shrewd  man  of 
business  will  attempt  to  measure  the  forces 


The  Movement  of  Prices.  29 

and  resistances  which,  at  a  given  time,  result 
in  carrying  prices  upward  or  downward  or 
in  holding  them  nearly  stationary.  And 
much  of  his  success  must  depend  upon  his 
ability  to  measure  correctly. 

But  there  has  been  a  downward  move- 
ment in  prices  which  has  been  going  on  ever 
since  the  year  1872,  and  while  the  undula- 
tory  character  of  the  movement  has  not  been 
wanting,  yet  the  result  of  it  has  been  to 
put  the  average  of  general  prices  upon  a 
very  low  plane,  although  not  lower  for 
many  staples  than  was  ever  known  before. 
Mr.  Edward  Atkinson  points  out 1  that  the 
necessaries  of  life  were  lower  in  1845—1850 
than  they  are  now,  but,  nevertheless,  quite 
a  revolution  has  taken  place,  and  there  are 
many  individuals  who  attribute  this  fall  in 
prices  to  the  "  outlawry  "  or  the  "  demoneti- 
zation "  of  silver,  in  spite  of  the  fact  that 
there  has  been  neither  outlawry  nor  de- 
monetization properly  so-called. 

Criticising  the  subject-matter  of  the  first 
chapter  in  this  volume,  when  about  to  be 

1  Testimony  before  House  Committee  on  Coinage,  Weights,  and 
Measures,  1891. 


3O          Money,  Silver •,  and  Finance. 

published  in  Lippincoifs  Magazine,  Mr. 
John  A.  drier,  having,  with  my  consent,  rny 
manuscript  before  him.  wrote  an  article  for 
the  same  number  of  Lippincottfs  in  which 
he  said :  "  In  1873,  when  the  United 
States  outlawed  silver  as  full  legal-tender 
money,  we  blindly  committed  an  absurd 
national  mistake  that  has  cost  the  mass  of 
our  people  the  loss  of  untold  millions  of 
dollars  annually.1 

"  Only  a  small  part  of  this  has  legally, 
but  unfairly,  enriched  a  few  thousands  of 
our  own  people,  while  many  millions  have 
been  uselessly  thrust  upon  our  creditors  on 
the  other  side  of  the  Atlantic.  The  late 
Mr.  Manning,  Secretary  of  the  Treasury, 
in  his  annual  report  of  December  6,  1886, 
distinctly  expressed  this  view  of  the  case. 
Mr.  Manning  was  a  believer  in  the  efficacy 
and  necessity  of  international  treaties  in 
the  use  of  silver  as  full  legal-tender  money. 
Thus,  in  advocating  such  treaties  he  urged 


1  The  United  States  merely  stopped  the  coinage  of  silver  dollars, 
the  country  using  only  paper  from  1862  to  1879.  No  effect  of  this 
stoppage  was  noticed  for  a  long  while ;  people  do  not  agree  on  the 
reasons  for  the  stoppage;  and  nobody  can  prove  that  prices  are 
lower  in  consequence  of  the  stoppage. 


The  Movement  of  Prices.  3 1 

us  to  discontinue  the  silver  coinage,  so  as 
to  bring  a  more  direct  financial  pressure  on 
all  other  nations  for  the  gold  of  the  world. 
lie  thought  if  we  should  abandon  the  coin- 
age of  silver  and  more  earnestly  enter  the 
greedy,  grasping  contest  for  gold  then  going 
on,  we  should  be  the  gainers.  With  our 
immense  natural  resources  in  the  produc- 
tion of  so  many  of  the  articles  Europe  must 
have,  we  could  procure  the  gold,  while  we 
could  deny  ourselves  of  part  of  -our  import- 
ed luxuries.  In  regard  to  the  cost  to  us  of 
the  demonetization  of  silver,  he  said  :  'The 
monetary  dislocation  has  already  cost  our 
farming  population,  who  number  nearly 
one  half  the  population  of  the  United 
States,  an  almost  incomputable  sum,  a  loss 
of  millions  upon  millions  of  dollars  every 
year,  a  loss  which  they  will  continue  to 
suffer  so  long  as  Congress  delays  to  stop 
the  silver  purchase  and  by  that  act  to 
compel  an  international  redress  of  the  mon- 
Netary  dislocation.' 

"  To  give  some  estimate  of  these  losses 
I  have  made  the  following  investigations. 
If  we  assume  that  it  required,  approxi- 


32          Money,  Silver,  and  Finance. 

mately,  the  same  amount  of  labor  to  farm 
an  acre  of  cereals  during  the  three  years, 
1871.  1872,  and  1873,  that  it  did  during 
the  three  years  1886,  1887,  and  1888,  then 
by  an  examination  of  the  farm  price  of 
cereals  as  given  by  the  U.  S.  Statistical 
Bureau,  it  will  be  seen  that,  on  a  gold 
valuation  at  each  period,  the  annual  shrink- 
age in  the  price  received  by  the  farmers 
for  cereals  during  the  latter  period  was 
about  $600,000,000.  It  can  be  seen  by  an 
examination  of  the  United  States  statistics 
that  for  the  five  years  1885—1889,  as  com- 
pared with  the  five  years  1880—1884,  our 
exportation  of  wheat  and  wheat-flour  fell 
off  in  value  to  the  enormous  extent,  of  $334,- 
000,000.  In  bushels  the  decrease  amounted 
to  about  159,000,000.  .  .  .  Although 
Mr.  Manning  was  opposed  to  our  continu- 
ing the  silver-dollar  coinage,  we  agree  with 
him  that  the  (  monetary  dislocation '  was 
one  of  the  main  causes  in  the  loss  of  a  part 
of  our  foreign  trade  and  the  value  of  our 
products.  While  this  loss  in  the  price  of 
cereals  is  so  great,  perhaps  the  loss  on  the 
other  products  of  the  farm  was  equally 


The  Movement  of  Prices.  33 

large.  The  farmers  of  the  United  States, 
who  have  felt  this  financial  grip  so  heavily 
for  so  many  years,  are  carefully  studying  the 
question.  They  have  apparently  reached 
some  unwise  conclusions  as  to  the  proper 
remedies,  but,  if  we  can  judge  aright,  they, 
as  a  class,  have  determined  that  silver  shall 
be  restored.  As  to  the  statistical  facts 
cited  above,  all  have  ready  access  to  our 
government  statistics,  and  if  you  see  fit 
you  can  collate  them,  and  then  the  facts 
will  depend  upon  the  reliability  of  these 
reports.  There  are  a  few  eminent  statisti- 
cal and  financial  authorities  who  deny  that 
the  disuse  of  silver  as  a  money-measuring 
metal  has  had  any  effect  in  causing  the 
world-wide  fall  in  prices  or  on  our  loss  of 
certain  foreign  exports !  They  admit  the 
changes,  but  attribute  them  to  other  causes. 
This  is  one  of  those  inductive  questions 
that  each  one  must  settle  for  himself.  Per- 
haps Mr.  Cowperthwait  has  not  the  least 
suspicion  that  the  disuse  of  silver  has  played 
any  part  in  this  world- wide  depression  in 
prices.  However,  the  British  Royal  Com- 
mission, appointed  a  few  years  ago  to 


34          Money,  Silver,  and  Finance. 

examine  exhaustively  this  question,  unani 
mously  admitted  this  important  conclusion. 
Six  of  the  twelve  called  for  the  prompt 
restoration  of  silver,  while  the  other  six 
hesitated  for  further  observation.  Thus, 
by  the  novel  attempt  to  get  down  to  a  gold 
basis,  which  Mr.  Cowperthwait  calls  '  an 
immovable  foundation,'  we  found  ourselves 
measuring  prices  by  a  commodity  for  which 
the  legal  demand  had  suddenly  and  largely 
increased.  We  also  found  that  its  value, 
either  as  a  commodity  or  as  money,  has 
largely  appreciated.  There  is  no  other 
way  to  ascertain  the  exchangeable  value  of 
money  than  to  see  what  it  will  exchange 
for  or  buy  in  the  markets  of  the  world. 
Tested  by  this  inexorable  economic  rule,  it 
will  be  found  that  the  average  prices  of 
commodities  used  in  common  life  have 
fallen  approximately  one  third  since  the 
demonetization  of  silver  in  1873.  This 
simply  means  that  the  purchasing  power 
of  gold  has  increased  about  one  half,  or 
fifty  per  cent.  If  the  greatest  possible 
stability  in  the  purchasing  power  of  coined 
money  is  desirable,  then  by  all  means  let 


The  Movement  of  Prices.  35 

us  maintain  the  concurrent  use  of  both 
metals,  in  order  to  maintain  their  mutual 
automatic  action  on  each  other's  value.  To 
measure  by  silver  alone  would  be  as  unwise 
as  to  measure  by  gold  alone.  We  might 
as  wisely  abandon  the  use  of  two  metals  in 
the  construction  of  the  pendulum  of  our 
most  perfect  clocks  or  of  the  balance-wheel 
of  our  chronometers.  The  pendulum  and 
balance-wheel  were  an  evolution  in  practi- 
cal mechanics,  and,  with  all  our  scientific 
advances,  we  do  not  abandon  this  use  of 
the  two  metals.  There  is  abundant  evi- 
dence on  all  sides  that  the  civilized  world 
will  not  abandon  the  use  of  either  silver  or 
gold  as  money-measuring  metals.  The  ap- 
prehensions entertained  by  Mr.  Cowper- 
thwait  that  we,  like  China,  India,  or  Mexico, 
may  perchance  reach  a  silver  basis,  are 
groundless,  although  we  may  decide  to  in- 
crease very  largely  our  use  of  silver.  There 
is  a  wide. and  safe  margin  between  this  in- 
creased use  of  silver  and  free  coinage.  Silver 
mono-nietallism  is  repudiated  even  by  the 
free-coinage  advocates.  The  nation  will 
hardly  maintain  a  policy  which  no  one  wants. 


36          Money,  Silver,  and  Finance. 

"  Up  to  1873  the  burden  of  measuring 
debts  throughout  the  civilized  world  rested 
substantially  on  the  two  metals,  gold  and 
silver.  The  demonetization  of  silver  in 
1873  wras  an  attempt  to  change  this  basis 
to  gold  alone.  Then  such  was  the  enor- 
mous legal  demand  for  gold  that  its  value 
as  a  commodity  was  advanced,  and  hence 
its  value  as  money.  Prices  then  began  to 
fall,  as  they  were  regulated  by  this  appre- 
ciated gold.  This  is  the  simple  explana- 
tion of  the  injurious  part  of  the  fall  in 
prices.  Measuring  the  value  of  wheat  and 
cotton  bought  here  at  gold  prices,  which 
could  be  bought  in  India  at  silver  prices, 
accounts  for  much  of  the  loss  of  profit  in 
our  foreign  trade  in  such  commodities. 
The  outlawry  of  silver  produced  a  great 
part  of  this  change,  but  not  all  of  it.  This 
portion  we  can  change  by  national  legisla- 
tion. A  fall  in  prices  is  not  an  unmixed 
evil,  but  a  fall  in  prices  when  the  cost  of 
production  has  not  been  equally  reduced  to 
the  producer  is  an  evil  that  the  producer 
will  do  his  best  to  remove." 

This  sounds  well,  but  before  the  Messrs. 


The  Movement  of  Prices.  3  7 

Lippincott  were  able  to  print  (October, 
1891)  for  the  November  number  of  the 
magazine  Mr.  Grier's  article  and  mine,  the 
farmers  of  the  United  States  were  in  the 
midst  of  jubilation  over  their  enormous 
crops,  and  I  fear  that  some  callous  farmers 
were  rejoicing  too  over  the  partial  failure  of 
crops  abroad.  Let  us  hope  that  our  farmers 
continued  their  careful  study  of  the  silver 
question  after  the  financial  grip  had  been 
relaxed,  and  that  some  of  them  used  dif- 
ferent spectacles  in  the  fall  of  1891  from 
the  ones  used  in  the  spring  of  1891.  In  a 
time  of  adversity  silver-tongued  orators, 
who  charge  all  woes  to  "demonetization," 
would  naturally  receive  more  attention 
than  they  would  receive  in  a  time  of  pros- 
perity, the  ups  and  downs  of  life  and  the 
periods  of  high  and  of  low  prices  affecting 
the  farmer  as  the  merchant  and  the  manu- 
facturer. 

As  a  rule,  taking  years  together,  the 
farmer  sells  at  low  prices  when  he  is  com- 
pensated for  this  by  being  able  to  buy  at 
low  prices,  or  he  pays  largely  when  he  re- 
ceives largely.  But  at  this  writing1  he  is 


Winter  of  '91-193, 


38          Money,  Silver,  and  Finance. 

selling  great  crops  at  high  prices  while  he 
is  still  buying  at  low  prices  auy  articles 
that  he  may  need. 

Few  farmers  get  rich ;  so  do  few  other 
strivers  after  wealth  ;  and  it  is  no  less  im- 
portant for  the  farmer  than  for  anybody 
else  to  notice  that  improvements  every- 
where are  revolutionizing  farming,  trade, 
commerce,  transportation,  and  all  business. 
Events  move  very  fast  nowadays,  and  he 
who  would  succeed  must  "keep  up  with 
the  procession." 

I  think  that  the  late  Mr.  Manning's  sa- 
gacity in  seeing  that  the  government  ought 
to  stop  the  purchasing  of  silver  entitles  him 
to  forgiveness  for  mistaking  bullion-value 
dislocation  for  monetary  dislocation,  and  to 
forgiveness  for  not  seeing  why  the  prices 
of  commodities  had  declined.  Indeed,  un- 
til Recent  Economic  Chanffes.3fpea.red  few 
people  could  have  understood  the  reasons 
for  this  decline.  The  Royal  Commission 
made  its  final  report  in  1888,  and  the  mem- 
bers of  it  were  not  much  better  informed 
regarding  the  direct  action  of  economic 
changes  upon  prices  than  was  the  late  Mr. 


The  Movement  of  Prices.  39 

Manning,  but  the  commission  itself  did  not 
advise  England  to  purchase  silver ;  and  if 
the  commission  had  been  considering  the 
silver  question  from  our  point  of  view  we 
should  not  have  been  advised  to  purchase 
silver  either.  The  commission  was  quite 
as  sensible  as  Mr.  Manning  when  it  re- 
ported, as  it  did  report,  "  No  settlement  of 
the  difficulty  is,  however,  in  our  opinion, 
possible  without  international  action." l 

In  order  to  show  how  much  the  farmers 
have  lost  by  "  dislocation  "  or  "  demonetiza- 
tion "  or  "  outlawry,"  Mr.  Grier  makes  the 
violent  assumption  that  it  required  in  1886, 
1887,  and  1888  the  same  amount  of  labor 
to  farm  an  acre  of  cereals  as  it  did  in 
1871,  1872,  and  1873,  and  I  note  that 
Mr.  Grier  overlooks  an  important  truth: 
a  monetary  change  could  not  affect  the 
farmer  in  the  prices  of  the  things  which  he 
sells  differently  from  the  way  such  mone- 
tary change  must  affect  him  in  the  prices 
of  the  things  which  he  buys — a  monetary 
change  which  makes  him  sell  lower  neces- 
sarily enabling  him  to  buy  lower.  But 

1  Silver  in  Europe,  p.  272,  S.  Dana  Horton. 


4O          Money,  Silver,  and  Finance. 

on  the  average  it  did  not  require,  in  1886, 
1887,  and  1888,  anything  like  so  much  la- 
bor to  farm  an  acre  of  cereals  as  was  re- 
quired in  1871,  1872,  and  1873,  the  inter- 
vening fifteen  years  being  wonderfully 
prolific  in  labor-saving  inventions.  Small 
farmers  could  not  obtain  a  profit  in  the  la- 
ter period  as  easily  as  in  the  earlier  period, 
because  much  of  the  agricultural  machin- 
ery of  our  time  is  unsuited  to  small  farms, 
and  because  the  development  of  vast  farms 
has  been  accompanied  by  a  fall  in  the 
prices  of  farm  products,  cheaper  processes 
and  augmented  production  bringing  about 
their  inevitable  results.  By  similar  means 
in  the  same  period  of  fifteen  or  twenty 
years  great  businesses  have  swept  small 
businesses  out  of  existence ;  but  however 
much  we  may  dislike  the  results  we  cannot 
fairly  charge  them  to  any  monetary  change, 
either  real  or  imaginary. 

Imaginary  indeed  is  the  "  dislocation," 
the  "  outlawry,"  and  the  "  demonetization  " 
about  which,  because  of  "  damnable  itera- 
tion," we  have  grown  so  tired  of  hearing. 
A  great  decline  has  taken  place  in  the 


The  Movement  of  Prices.  41 

price  of  silver  bullion,  but  nobody  sells 
merchandise  for  silver  bullion,  and  its 
price  movements  concern  very  few  people. 
What  people  generally  are  concerned  about 
is  the  prices  at  which  they  buy  and  sell 
merchandise,  stocks,  bonds,  or  any  valua- 
ble thing.  Intrinsically,  silver  coins  are 
worth,  in  gold,  say  thirty  per  cent.1  less 
than  their  face  value,  and  we  may  add 
that  paper  money  is  intrinsically  worth 
nearly  one  hundred  per  cent,  less  than  its 
face  value,  but  the  face  value  itself  is  all 
that  concerns  you,  whenever  you  use  the 
paper  or  the  silver  coins  in  buying  or 
selling  anything.  If  silver  coins  were  not 
receivable  in  settlement  of  debts,  if  you 
could  not  buy  goods  with  them,  or  if  you 
could  not  exchange  them  for  gold  coins,  at 
the  face  value  of  each,  then  "  dislocation," 
or  "  outlawry,"  or  "  demonetization  "  might 
be  fairly  charged,  but  the  untruth  of  the 
charge  is  demonstrated  thousands  of  times 
every  day,  on  each  side  of  the  Atlantic, 
ten  silver  dollars  buying  as  much  as  a 
golden  eagle  will  buy,  twenty  shillings 
being  as  valuable  as  is  a  sovereign,  twenty 

i  1896.    Fifty  per  cent. 


42          Money,  Silver,  and  Finance. 

francs  as  a  napoleon,  and  twenty  marks 
as  a  doppelkrone.  If  an  act  of  demonetiza- 
tion or  outlawry  had  been  passed  by  the 
American  Congress,  or  by  the  legislatures 
of  England,  France,  or  Germany,  the 
equality  in  the  purchasing  power  of  gold 
and  silver  coins  would  have  been  over- 
thrown. Instead  of  complaining  of  the 
so-called  results  of  an  imaginary  demone- 
tization of  silver,  we  should  be  thankful 
that  our  legislation,  in  favor  of  silver,  has 
not  yet  resulted  in  the  demonetization  of 
gold. 

But  if  we  deny  that  silver  has  been 
either  demonetized  or  outlawed,  and  deny 
also  that  the  fall  in  the  price  of  silver  bul- 
lion has  caused  the  fall  in  the  prices  of 
commodities,  how  shall  we  account  for  the 
latter  ?  Fortunately  this  part  of  the  silver 
question  has  been  gone  over  in  great  de- 
tail and  been  treated  in  a  masterly  way 
by  Mr.  Wells,  in  his  Recent  Economic 
Changes,  the  volume  already  quoted ;  and 
nobody  can  be  better  informed  upon  such 
changes  than  he,  in  spite  of  the  appearance 
that  in  his  general  reading  there  did  not 


The  Movement  of  Prices.  43 

happen  to  be  included  a  certain  chapter  in 
Herbert  Spencer's  works. 

A  stock  argument  of  the  silver  advocate 
is  this :  Because  silver  and  commodities 
have  declined  together — cause  and  effect 
in  his  mind — therefore,  if  you  advance 
the  price  of  silver  you  will  advance  the 
prices  of  commodities.  A  careful  study  of 
the  general  decline  in  prices,  however,  will 
show  that  silver  and  commodities  have 
felt  the  force  of  great  economic  changes, 
these  changes  being  the  cause  of  the  down- 
fall in  almost  all  prices,  that  of  silver 
included.  Any  man  of  business  familiar 
with  one  or  more  articles  of  trade  or 
commerce  which  have  fallen  in  price,  or 
familiar  with  the  decline  in  freight  and 
transportation  rates  during  the  period 
since  the  very  high  range  of  1872,  can  see 
that  invention  and  discovery  have,  one  or 
the  other  or  both,  put  down  prices  and  rates 
at  least  in  particular  instances ;  and  we 
have  yet  to  hear  of  a  case  of  decline  which 
can  be  attributed  to  the  decline  in  silver, 
excepting,  of  course,  in  goods  manufactured 
from  this  metal. 


44          Money,  Silver,  and  Finance. 

Invention  and  discovery  have  played  a 
great  part  in  the  decline  of  silver  itself, 
new  mines  and  new  processes  yielding 
greatly  increased  production ;  and  if  we 
take  any  of  the  staple  articles,  iron,  steel, 
petroleum,  cottons,  woollens,  paper,  quinine, 
tea,  coffee,  sugar,  beef,  wheat,  etc.,  etc.,  a 
similar  story  is  told  of  a  revolution  accom- 
plished or  now  progressing,  everything 
being  put  upon  the  market  at  much  lower 
cost  than  ever  before.  Nothing  is  easier 

o 

than  to  say  that  prices  in  general  have 
fallen,  because  silver  has  fallen  :  nothing 
can  be  more  difficult  than  to  prove  the 
connection.  The  appearance  at  the  same 
time  of  two  or  more  phenomena  suggests 
cause  and  effect ;  and  so  when  "  demoneti- 
zation "  is  pointed  out  as  the  cause  of  the 
decline  in  the  price  of  silver,  and  this 
"  demonetization "  and  this  decline  are 
pointed  out  as  the  cause  of  the  decline 
in  general  commodities,  these  statements 
naturally  find  believers,  although  there  is 
no  better  reason  for  attributing  the  fall  in 
general  prices  to  the  fall  in  the  price  of 
silver,  than  there  would  be  for  attributing 
the  fall  in  the  price  of  silver  to  the  fall  in 


The  Movement  of  Prices.  45 

general  prices.  Certainly  no  fair-minded 
person  can  read  Mr.  Wells'  book  without 
becoming  fully  convinced  that  the  fall  in 
the  prices  of  commodities  and  the  fall  in 
the  rates  for  transportation  are  directly  due 
to  the  force  of  irresistible  economic  changes, 
silver  itself  being  forced  down  with  other 
things,  anti-silver  legislation  as  a  force,  in 
comparison,  having  little  appreciable  effect. 
Not  content  with  proving  the  natural- 
ness, so  to  speak,  of  the  fall  in  prices,  Mr. 
Wells  shows,  too,  that  the  fall  is  far  from 
being  such  an  unfortunate  thing  as  the 
"  silverites  "  claim  it  to  be.  Instances  of  both 
the  naturalness  of  the  decline  in  price  and 
the  benefit  of  that  decline  are  afforded  by 
a  oreat  number  of  articles  of  which,  for  ex- 

O  7 

ample,  quinine  is  notable.  Formerly  the 
medicinal  preparation  sold  at  over  one 
dollar  per  ounce,  and,  in  a  time  of  civil 
war  in  New  Granada,  it  advanced  to  over 
four  dollars  per  ounce,  but  in  those  times 
quinine  was  manufactured  solely  from  that 
cinchona-bark  which  could  be  obtained 
from  trees  in  the  forests  of  the  northern 
states  of  South  America.  Now  the  trees 
are  cultivated  in  the  East  Indies ;  these 


46          Money,  Silver,  and  Finance. 

trees  yield  more  than  the  indigenous  trees 
of  South  America,  and  by  "  new  and  more 
economical  processes  more  quinine  can  now 
be  made  at  less  cost  in  from  three  to  five 
days  than  could  have  been  effected  by  old 
methods  in  twenty  days."  The  fall  in  the 
price  of  quinine  is  hard  upon  those  South 
Americans  who  used  to  get  high  prices  for 
their -bark,  but  the  benefit  to  multitudes  of 
human  beings  cannot  be  questioned.  We 
may  accentuate  the  bearing  of  the  experi- 
ence of  quinine  upon  the  silver  question  by 
remarking  that  both  the  South  Americans 
who  have  lost  and  the  East  Indians  who 
have  gained  are  handlers  of  silver  money ; 
therefore,  adopting  the  views  of  the  "  silver- 
ites,"  excluding  natural  causes,  the  decline 
of  silver  has  been  the  cause  of  a  transfer  of 
business  from  one  silver-using  community 
to  another  silver-using  community  !  What 
the  "  silverites "  would  say  regarding  the 
benefit  derived  by  all  other  communities 
from  the  cheapening  of  quinine,  no  matter 
what  moneys  they  use,  we  can  not  guess.1 

1  N.  Y.  market  price  of  quinine,  1891,  about  twenty  cents  an 
ounce. 

1896.  Quinine  is  about  one  third  higher  in  price  than  in  1891,  and 
silver  is  as  much  lower. 


The  Movement  of  Prices.  47 

In  the  most  natural  manner,  too,  the  busi- 
ness of  tea  cultivation  and  tea  exportation 
seems  to  be  in  process  of  transfer  from. 
China  to  India,  India  having  adopted  im- 
portant improvements.  The  world  is  bene- 
fited by  obtaining  tea  at  very  low  cost, 
although  Chinamen  have  never  raised  a 
hand  against  silver,  and  although  the  peo- 
ple of  India  use  silver  now  as  they  always 
have  used  it.1 

Then  the  beet-sugar  industry  has  been 
built  up  largely  at  the  expense  of  the 
cane-sugar  industry,  and  this  without  re- 
gard to  the  circumstance  that  the  Europeans 
engaged  in  raising  beets  and  in  making 
beet-sugar  have  to  work  upon  the  gold 
basis,  while  some  of  the  countries,  whose 
people  are  interested  in  cane-sugar,  are 
upon  a  silver  basis,  and  at  least  one,  Cuba, 
upon  a  paper  basis.  But  the  world  now 
gets  very  low-priced  sugar. 

A  single  day's  observation  of  the  indus- 
tries about  him  will  yield  to  anybody 
sufficient  evidence  of  overwhelming  indus- 
trial changes,  all  toward  a  lower  cost  of 
production.  A  little  study  will  show  that 

1  1896.  India,  while  still  gaining  in  tea  cultivation,  is  losing  con- 
fidence in  silver  as  perfect  money. 


48          Money,  Silver,  and  Finance. 

in  the  past  quarter  of  a  century  more  im- 
portant results  Lave  been  attained  by  in- 
dustrial development  than  in  fifty  previous 
years.  If  anything  else  has  forced  prices 
downward,  that  other  thing  must  have 
had  a  comparatively  insignificant  effect. 
There  is  left  no  part  of  the  decline  in  prices 
to  be  so  accounted  for ;  industrial  develop- 
ment not  monetary  change  accounts  for  the 
whole  decline ;  the  action  of  industrial  de- 
velopment is  direct  and  is  apparent  to  all ; 
the  monetary  change,  as  charged,  is  itself 
denied,  and  if  it  could  have  caused  any 
part  of"  the  decline  in  prices,  its  action  is 
obscure  and  the  measurement  of  the  effect 
of  the  action  must  be  left  to  guessing. 
Price  movements  used  to  be  charged  to 
currency  movements  but  the  theory  was 
exploded  long  before  Mr.  Spencer  penned 
the  lines  herein  quoted,  and  he  had  no 
occasion  to  attribute  price  movements  to 
changes  either  in  the  volume  of  money  or 
the  sum  per  capita.  Due  attention  is  given 
to  this  old  currency  theory  in  another 
chapter  of  this  book. 


CHAPTER  III 


MUCH  has  been  said  of  the  advantages 
which  India  has  enjoyed  through  the 
cheapening  of  silver,  the  farmer  and 
planter  of  India  receiving  now,  it  is 
claimed,  as  many  'rupees  for  their  crops  as 
formerly,  while  the  American  farmer  and 
planter  receive  fewer  dollars  than  formerly, 
And  the  fact  of  the  rupee  retaining  only 
its  old  purchasing  power  while  the  dollar 
has  a  higher  purchasing  power,  is  offered 
as  evidence  that  instead  of  the  supposed 

1  The  rupee  is  the  standard  unit  of  value  of  India  and  also  a  sil 
ver  coin  of  India,  nominally  worth  forty-eight  cents  or  two  English 
shillings.  The  market  value  of  rupees  changes  hourly  with  the  mar- 
ket value  of  silver  bullion.  At  this  writing  rupees  are  worth  in  Lon- 
don only  the  equivalent  of  thirty-four  cents  each,  silver  bullion  being 
down  to  ninety-five  cents  per  ounce. 

1896.    The  present  value  of  the  rupee  is  about  twenty -four  cents. 

49 


50          Money,  Silver,  and  Finance. 

depreciation  of  silver,  what  lias  occurred  is 
an  appreciation  of  gold.  When  arguing  in 
this  manner  the  "  silverite  "  loses  sight  of 
the  circumstance  that  silver  dollars  will  buy 
in  America,  just  as  much  as  gold  dollars 
will  buy,  and  that  silver  coins  are  equal  in 
purchasing  power  to  gold  coins  in  most 
European  countries,  provided  you  wish  to 
buy  goods  in  the  country  which  has  Issued 
the  coins.  Whether  we  speak  of  appre- 
ciation or  depreciation,  the  question  there- 
fore must  lie  between  the  rupee  and  money 
generally,  not  between  the  rupee  and  gold. 
In  many  parts  of  this  book,  proof  is  given 
of  the  truth  of  the  theory  that  prices 
have  declined  and  reasons  are  given  for  be- 
lieving  that  money  lias  not  appreciated. 
Simply  stating  here,  that  if  money  had  ap- 
preciated real-estate  and  rents  and  wages 
would  have  gone  down,  which  they  have 
not,  and  interest  rates  would  have  gone  up, 
which  they  have  not,  we  may  well  confine 
our  present  attention  to  India  and  to  her 
silver  rupee. 

It  has  been  pointed  out  that  the  wheat 
and  cotton  of  India  are  sold  in  Liverpool 


India  and  Her  Silver  Rupee.          5 1 

in  competition  with  American  wheat  and 
cotton,  and  that  the  Oriental,  because  of 
willingness  to  receive  silver,  while  we  ex- 
act gold,  has  an  advantage  of  twenty  or 
thirty  per  cent,  over  American  compet- 
itors.1 The  Oriental  producer  and  ex- 
porter have  been  growing  rich  at  our 
expense,  it  is  said,  and  the  really  great 
industrial  progress  which  India  has  made 
in  the  past  decade  or  so  is  triumphantly 
referred  to  as  the  natural  result  of  India's 
holding  to  the  silver  basis.8  Strange  as  it 
may  seem,  the  silver  advocate  does  not  call 
attention  to  the  Oriental  importers  and  to 
the  Oriental  consumers  of  foreign  goods. 
Are  these  people  growing  rich,  too,  or  do 
they  find  that  foreign  goods  have  to  be 
paid  for  with  gold  ?  And  if  the  producer 
and  exporter  gain  twenty  or  thirty  per 
cent.,  because  exportations  are  paid  for  in 
silver,  must  not  the  importer  and  consumer 
lose  twenty  or  thirty  per  cent,  because 
importations  have  to  be  paid  for  in  gold  ? 
In  other  words,  through  the  medium  of 

1  1896.     Now  nhont  fifty  por  rent. 

2  India  had  made  {Treat  strides  in  railway  development,  and  vast 
new  areas  are  now  reached  by  trade  and  commerce. 


5  2  Money,  Silver,  and  Finance. 

foreign  trade,  must  not  some  people  in 
India  be  rapidly  obtaining  possession  of 
the  wealth  of  other  people  in  India? 
And  at  a  twenty-or-thirty-per-cent.  rate  the 
transfer  of  the  total  wealth  of  India  from 
some  pockets  to  others  will  not  take  very 
long ;  indeed,  it  ought  to  have  been  accom- 
plished some  years  ago  ! 

In  truth,  however,  India  carries  on  for- 
eign trade  in  the  manner  pursued  by  other 
countries — she  both  buys  and  sells  com- 
modities on  the  gold  basis  of  value,  and 
the  contrivance  of  foreign  exchange  is  the 
means  of  purchase  and  sale,  silver  not 
being  received  in  direct  payment  for  ex- 
portations  of  merchandise,  and  gold  not 
being  sent  away  in  direct  payment  for 
importations  of  merchandise,  as  a  general 
thing.  The  producer  receives  money  in 
the  form  of  silver  rupees  from,  the  exporter, 
but  the  exporter  draws  a  commercial  bill 
of  exchange  on  London,  and  this  bill  of 

O  ' 

exchange  is  for  gold.  Conversely,  the 
Indian  importer  of  merchandise  pays  for 
that  merchandise  in  gold  in  London,  pro- 
viding money  or  credit  there  to  meet  a 


India  and  Her  Silver  Rupee.         53 

bill  of  exchange  drawn  against  him, 
although  this  same  importer  sells  the  mer- 
chandise in  India,  and  for  silver  rupees. 
The  rupee  is  suitable  for  the  interior  business 
of  India,  but  when  Indian  products  reach  the 
seaports,  and  when  foreign  products  come 
to.  these  seaports,  the  bullion  value  of  the 
rupee  has  to  be  taken  into  the  calculation, 
and  the  changes  in  that  bullion  value  must 
necessarily  be  reflected  throughout  India, 
whether  the  result  be  to  hold  such  prices 
up  as  would  otherwise  go  down,  or  to  put 
such  prices  up  as  would  otherwise  remain 
stationary.  The  competition  among  Indian 
importers  forces  them  to  pay  as  high  gold 
prices  as  possible  and  to  sell  for  as  low 
silver  prices  as  possible.  The  competition 
among  Indian  exporters  forces  them  to  pay 
as  high  silver  prices  as  possible  and  to  sell 
for  as  low  gold  prices  as  possible.  This 
double  competition  adjusts  the  prices  of 
exportable  and  importable  goods,  in  India, 
as  elsewhere ;  and  there,  as  throughout  the 
commercial  world,  the  competition  helps 
to  adjust,  also,  the  prices  of  domestic 
goods  when  sold  for  domestic  consump- 


54          Money,  Silver ;  and  Finance. 

tion.  This  fact  should  not  be  lost  sight 
of :  the  unit  of  value  of  India,  the  rupee, 
constantly  changes  in  price,  the  price 
moving  upward  and  downward  with  the 
price  of  Mexican  dollars  or  of  other  silver 
moneys  of  the  Orient,  all  of  them  following 
closely  the  fluctuations  in  the  price  of 
silver  bullion.1  If  you  use  the  money  of 
the  United  States  or  Canada,  or  of  most  of 
Europe,  you  can  buy  commodities,  on  the 
average,  at  prices  say  thirty  per  cent, 
below  the  average  of  1872,  and  there  are 
many  reasons  for  this  decline  in  prices.  If 
you  cannot  buy  at  low  prices,  with  Indian 
rupees,  Mexican  dollars,  or  Eastern  silver, 
money,  still  when  you  do  change  your  money 
into  these  moneys  you  obtain,  say  thirty  per 
cent,  more  of  these  moneys  than  you  could 
have  obtained  in  1872.  You  can  buy  at 
low  prices  with  good  money,  or  you  can 
buy  at  high  prices  with  depreciated  money, 
and  not  make  any  better  bargain  in  either 
case.  And  you  may  be  very  sure  that  the 
great  merchants  of  India,  China,  and  the 
East  generally  watch  closely  the  price  of 
the  rupee,  the  Mexican  dollar,  and  of  silver 

1  Mexican  dollars  circulate  extensively  in  the  East. 


India  and  Her  Silver  Rupee.         55 

bullion  on  the  London  market,  and  regu- 
late their  own  prices  of  commodities  in 
accordance  therewith. 

The  declining  value  of  silver  has  given  a 
slight  advantage  to  Oriental  producers  and 
exporters  of  merchandise  over  Oriental  im- 
porters and  consumers,  and  the  flow  of 
silver  to  the  East  has  been  accelerated  by 
the  willingness  of  Europe  to  get  rid  of 
silver  or,  let  us  say,  a  willingness  to  give 
more  silver  for  Oriental  products  than 
formerly.  When  silver  declines  a  fraction, 
foreign  exchange  in  the  East  is  affected  at 
once ;  exporters  of  merchandise  must  find  it 
easier  to  transact  business,  and  importers 
must  find  difficulty,  until  prices  adjust 
themselves  to  the  new  conditions.  Or, 
looking  on  silver  as  a  commodity,  we  can 
see  that  for  many  years,  because  of  a  lowr 
price,  the  East  has  been  able  to  obtain 
easily  large  quantities  of  silver.  Apparently, 
silver  being  the  money  of  the  East,  this 
accumulation  of  silver  has  been  advanta- 
geous. Is  the  advantage  real  or  nominal  ? 
There  is  now  such  an  abundance  of  silver  in 
the  East  as  to  make  what  has  been  called  a 


56          Money,  Silver,  and  Finance. 

state  of  congestion,  and  there  is  no  outlet  for 
the  metal.  Other  countries  have  willingly 
given  silver  for  Oriental  products,  but  these 
countries  will  not  give  their  own  products 
in  exchange  for  the  same  silver.  The 
Secretary  of  the  United  States  Treasury, 
Mr.  Foster,  in  a  letter  to  the  banker's 
convention,  November,  1891,  speaking  of 
the  decline  in  the  price  of  silver,  goes  on 
to  say  : 

"  Other  causes,  which  I  cannot  enlarge 
upon,  have  operated  to  produce  this  result, 
prominent  among  which  is  the  large  falling 
off  in  the  shipments  of  silver  to  India  and 
China.  The  shipments  of  silver  from  Lon- 
don to  India  during  the  first  nine  months 
"of  the  present  calendar  year  show  a  reduc- 
tion of  over  $17,000,000  as  compared  with 
the  same  period  of  the  prior  year,  while  the 
shipments  of  silver  to  China  show  even  a 
greater  decrease." 

India  and  China  have  a  plethora  of  that 
kind  of  money  which  great  commercial 
countries  do  not  want,  and  India  and  China 
seem  to  have  discovered,  just  when  the  value 
of  silver  is  very  low,  that  they  cannot  take 


India  and  Her  Silver  Rupee.          5  7 

so  freely ~of  such  money.  (  1  Bourse,  if  the 
United  States  should  adopt  free  coinage  of 
silver,  then  it  might  appe^  that  the  heathens 
were  longer-headed  than  now  seems  evi- 
dent. They  could  sell  us  silver  then  at  a 
good  profit  over  the  cost.  But  at  this  mo- 
ment it  is  too  soon  to  contend  that  Oriental 
countries  have  been  benel/tea  by  the  decline 
in  the  value  of  silver.  In  the  early  years 
of  our  war,  both  in  the  North  and  in  the 
South,  it  was  not  difficult  to  sell  goods  for 
paper  money,  and  it  was  comparatively 
easy  to  accumulate  paper  money  and  paper- 
money  obligations ;  but  a  little  later  the 
positions  of  the  money  accumulators  in  the 
two  sections  drifted  farther  and  farther 
apart,  as  it  became  clear  in  the  North  that 
the  paper  money  of  the  United  States 
would  appreciate,  and  as  it  became  clear 
in  the  South  that  the  paper  money  of  the 
Confederacy  would  depreciate.  So  the 
question  whether  India  and  China  and 
other  silver-money  countries  have  actually 
been  benefited  by  the  opportunity  to  ac- 
cumulate silver  must  depend  largely  upon 
the  future  price  of  silver.1 

i  Written  in  1891. 


58  Money,  Silver,  and  Finance. 

Corroborative  of  such  a  view,  although 
doubtless  not  intended  to  be  so,  I  think,  is 
the  testimony  of  Mr.  F.,  a  New  York 
exporter,  before  the  House  Committee  on 
Coinage,  Weights,  and  Measures,  February, 
1891.  Speaking  of  our  ability  to  compete 
with  Russia  in  tht  shipping  of  oil  to  the 
East,  Mr.  F.  said : 

"  It  is  a  matter  of  exchange.  It  is  rela- 
tive to  the  gold  value  of  silver.  It  is  what 
we  call  the  fall  or  rise  in  exchange.  All 
our  exchanges  in  silver-using  countries  are 
regulated  by  the  gold  value,  of  silver  in 
London.  The  banker  makes  his  quotations 
in  exchange  in  China  or  India,  on  London, 
by  the  telegraphic  price  of  silver  on  the 
London  market  on  that  day,  and  therefore 
the  price  of  silver  governs  the  exchanges 
of  the  silver-using  countries  all  over  the 
world.  As  a  singular  confirmation  of  what 
I  say  with  regard  to  Russian  oil  during  the 
last  year,  some  of  the  refiners  asked  me 
about  this  question  of  exchange,  why  it 
was  they  were  having  such  a  demand  for 
their  oil.  I  explained  the  whole  matter 
to  them.  I  drew  up  a  schedule  showing 


India  and  Her  Silver  Rupee.         59 

the  quotations  of  oil  in  sterling,  and  as 
silver  rose  in  gold  value  oil  rose  in 
sterling." 

From  which  it  appears  that  every  ad- 
vance in  the  market  price  of  silver  helps 
us  in  exporting  merchandise  to  silver-using 
countries.  Doubtless  every  decline  in  the 
market  price  of  silver  helps  us  in  our  im- 
porting of  merchandise  from  silver-using 
countries.  In  one  case  we  are  more  ready 
to  sell  merchandise,  because  we  receive 
appreciated  money  in  payment.  In  the 
other  case  we  are  more  ready  to  buy  mer- 
chandise, because  we  are  allowred  to  pay  for 
it  with  depreciated  money.  The  fact  that 
we  both  buy  and  sell  in  London  exchange 
is  offset  by  the  rate  of  exchange  being  con- 
trolled by  the  market  price  for  silver  bul- 
lion at  the  time  of  each  transaction.  It  has 
been  shown  that  the  East  more  easily  sells 
goods  and  more  easily  accumulates  silver 
when  silver  is  down  in  price  than  when 
silver  is  up ;  and,  necessarily,  the  East  more 
easily  buys  goods  and  has  more  difficulty 
in  accumulating  silver  when  silver  is  up 
than  when  silver  is  down. 


60          Money,  Silver,  and  Finance. 

The  accumulation  of  silver  in  the  East 
brings  to  mind  the  accumulation  of  silver 
in  the  United  States  Treasury.  In  so  far 
as  a  decline  in  silver  helps  the  exportation 
of  merchandise  from  a  country,  that  decline 
helps  the  accumulation  of  silver  in  that 
country ;  not  that  silver  need  be  used  in 
direct  payment  for  merchandise,  but  be- 
cause silver  bullion  is  a  commodity,  and  be- 
cause important  sums  of  silver  coins  vary 
in  price  with  this  commodity.  Comparing 
to-day's  market  price  of  silver  bullion  with 
the  much  higher  average  of  the  past  ten  or 
fifteen  years,  it  is  fair  to  say  that  if  India 
had  frequently  offset  favorable  trade  bal- 
ances by  purchases  of  British  consols  or  of 
United  States  bonds,  and  so  had  avoided 
importing  so  large  a  quantity  of  silver,  a 
portion  of  India's  loss  from  the  depreciation 
of  silver  would  have  been  saved ;  and  it  is 
fair  also  to  say  that  if  the  United  States 
had  collected  less  money  in  the  form  of 
taxes  and  had  accumulated  a  correspond- 
ingly smaller  sum  of  silver,  the  govern- 
ment issuing  or  permitting  to  be  issued 
other  paper  money  than  silver  notes,  our 


India  and  Her  Silver  Rupee.         6 1 

people  would  be  better  off  than  they  are 
now.  If  the  exportation  of  merchandise 
could  be  facilitated  by  the  Treasury's  buy- 
ing an  increased  amount  of  silver  per 
month,  still,  in  the  absence  of  any  assur- 
ance that  the  Treasury  can  ever  sell  its 
silver,  such  buying,  for  such  a  purpose, 
would  be  foolhardy. 

I  am  told  that  "  Some  of  the  large  Indian 
native  bankers  have  been  so  disturbed  by 
the  late  violent  fluctuations  in  silver  that 
they  have  begun  to  carry  part  of  their 
reserve  in  gold."  I  do  not  know  how  far 
this  custom  extends,  but  I  should  think  it 
likely  to  grow. 

NOTE. — The  flow  of  silver  to  India  is  not  increased  by  the 
high  nominal  value  which  is  placed  on  silver  in  the  coinage  of 
rupees.  In  our  mint,  16  ounces  of  silver  are  called  equal  to 
one  ounce  of  gold  ;  in  the  mints  of  the  Latin  union,  15^  to  I 
is  the  ratio  ;  and  in  coining  rupees  only  15  ounces  of  silver  are 
supposed  to  be  needed  to  represent  the  value  of  one  ounce  of 
gold.  But  no  mint  in  the  world  buys  silver  bullion  at  any 
price  above  the  market  price,  excepting  those  mints  which  use 
depreciated  coins  to  pay  for  the  bullion.  It  is  not  important 
to  the  seller  of  bullion  to  receive  high  prices  in  depreciated 
coins,  rather  than  low  prices  in  money  which  has  not  de- 
preciated. 

NOTE  TO  THIRD  EDITION,  1896.— The  Indian  mints  stopped  coining 
rupees  in  June,  1893.  The  distress  from  money  depreciation  had 
become  great,  particularly  among  the  wage-earning  and  salary -earn- 
ing classes.  Their  incomes  had  not  been  proportionately  advanced— 
never  are  in  such  cases.  India  may  now  be  cited  as  a  horrible  exam- 
ple instead  of  an  example  to  follow. 


CHAPTER  IV. 

PRICES    AND    WAGES. 

THE  silver  advocate  may  not  be  convinced 
that  the  cause  of  the  fall  in  prices  is 
an  industrial  progress  hitherto  unparalleled, 
although,  if  he  would  look  in  the  direction 
of  the  facts,  they  would  stare  at  him  from 
every  vast  farm,  every  great  factory,  every 
fast  or  cheaply  run  steamship  or  railway 
train,  and  from  every  rnodernly  managed 
industry.  If  he  be  obstinate  on  the  subject 
of  the  cause  of  the  decline  in  prices,  then, 
what  will  he  say  to  this  bold  statement? — 
the  decline  itself  has  been  a  good  thing 
for  the  world.  Evidently,  whatever  may 
be  said  regarding  the  cause  of  the  fall  in 
prices,  it  will  be.  folly  to  continue  to  com- 
plain, provided  we  can  show  that  the  fall 
has  been,  on  the  whole,  beneficial. 

A  fall  in  the  price  of  an  article  is,  gen- 
erally speaking,  a  benefit  to  the  buyers  and 
62 


Prices  and  Wages.  63 

an  injury  to  the  sellers  of  that  article.  A 
fall  in  the  prices  of  many  articles  is  a  bene- 
fit to  many  buyers  and  an  injury  to  many 
sellers.  In  this  limited  view  of  the  case 
one  man's  loss  is  another  man's  gain,  and  if 
the  number  of  buyers  and  the  number  of 
sellers  were  equal,  the  whole  community 
could  neither  gain  nor  lose  by  either  a  rise 
or  a  fall  in  prices,  for  the  quantity  of  things 
bought  necessarily  equals  the  quantity  of 
things  sold.  But  it  is  not  true  that  there 
are  in  any  community  as  many  sellers  as 
there  are  buyers ;  on  the  contrary,  the  buy- 
ers far  outnumber  the  sellers,  always  and 
everywhere.  Everybody  is  a  buyer,  but 
that  great  proportion  of  the  people  who 
(themselves  and  their  families)  have  fixed 
incomes,  who  live  by  fees  for  professional 
services,  who  earn  salaries,  and  who  earn 
wages,  are  not  sellers.  And  if  a  vast  pro- 
portion of  the  population  obtain  money 
without  selling  anything  but  their  time  or 
labor,  and  if  they  pay  out  their  money  for 
all  kinds  of  merchandise,  then  it  follows 
that  a  fall  in  the  prices  of  merchandise  must 
benefit  the  vast  majority.  Now,  this  bene- 


64          Money,  Silver,  and  Finance. 

fit  would  not  be  so  clear  if  it  could  be  shown 
that  incomes,  fees,  salaries,  and  wages  had 
gone  down  with  the  prices  of  commodities. 
To  the  best  of  my  knowledge,  however, 
while  incomes  from  investments  have  de- 
clined and  rich  people  have  had  to  be  con- 
tent with  smaller  incomes,  yet  there  is  no 
proof  that  fees,  salaries,  and  wages  have  de- 
clined at  all.  There  is  proof,  indeed, 
that  wage*  have  advanced.  "Wage-earners 
and  their  families  alone  make  up  a  majority 
of  the  people,  and  if  wage-earners  now 
receive  more  money  than  formerly,  while 
everything  the  wage-earner  buys  can  be 
bought  for  less  money  than  formerly,  how 
shall  we  escape  from  the  conclusion  that 
the  wage-earners  have  been  benefited  by 
the  decline  in  the  prices  of  commodities  ? 
And  if  the  majority  have  been  benefited, 
then  how  can  it  be  contended  that  the  fall 
in  prices  has  been  a  bad  thing  ?  Certainly 
many  individuals  and  many  communities 
have  been  hurt  when  other  individuals  and 
other  communities  have  captured  the  form- 
er's industries,  but  the  law  of  the  survival 
of  the  fittest  holds  absolute  sway,  and  it  is 


Prices  and  Wages.  65 

worse  than  useless  to  quarrel  with  it.  We 
may  offer  sympathy  to  the  unfortunate 
ones,  but  cannot  help  thinking  that  their 
misfortune  is  due  to  their  inability  to  keep 
up  with,  the  lightning  speed  of  the  time- 
The  world  has  not  stepped  backward,  and 
the  times  cannot  be  far  out  of  joint,  when 
employers  of  laborers  can  afford  to  pay 
more  for  labor  than  ever  before.  The  em- 
ployers of  to-day  do  better  for  the  com- 
munity than  the  employers  of  yesterday, 
both  in  selling  goods  at  lower  prices  and  in 
paying  out  more  money  to  each  of  their 
employees,  and  while  we  should  not  under- 
value the  sympathy  which  is  due  to  those 
employers  who  have  been  beaten,  yet  we 
ought  not  to  withhold  congratulation  from 
those  employers  who  have  succeeded. 
They,  and  the  inventors  and  discoverers 
allied  with  them,  have  given  the  world  its 
necessary  articles  and  its  luxuries  at  lower 
prices  than  ever  before,  and  without  redu 
cing  the  sum  annually  paid  to  the  work- 
men employed. 

The  vital  point  in  the  silver  question  lies 
in  the  rate  of  earnings  of  laborers  and  of 

5 


66          Money,  Silver,  and  Finance. 

all  workmen,  and  it  is  strange  that  the 
House  Committee  on  Coinage,  Weights, 
and  Measures,  when  reporting  on  the  Sen- 
ate Silver  Bill,1  should  have  touched  so 
lightly  upon  this  wage  question.  Even  if 
we  admit,  for  the  sake  of  argument,  what 
is  plainly  absurd,  that  prices  have  fallen 
because  of  "  demonetization,"  yet  if  the  fall 
in  prices  has  not  been  accompanied  by  a 
fall  in  wages  to  at  least  so  great  an  extent, 
then  the  fall  in  prices  must  in  itself  be 
accounted  a  good  thing.  That  is  to  say, 
"  demonetization,"  from  the  "  silverite's  " 
point  of  view,  has  been  the  means  of  enabling 
wage-earners  to  either  live  better  or  to  save 
more  than  they  could  when  they  had  to 
pay  higher  prices  for  everything — a  major- 
ity of  the  community  are  better  off  than 
they  used  to  be.  And  if  wage-earners  are 
well  off,  then  also  must  be  well  off  a  large 
portion  of  the  minority,  for  money  paid  in 
wages  is  at  once  returned  through  retail 
trade. 

However,  the  majority  of  the  committee 
reporting  against  free  coinage  say  nothing 
in  their  report  about  wages,  while  the  mi- 

»  1891. 


Prices  and  Wages.  67 

nority,  in  favor  of  free  coinage,  content 
themselves  with  an  if  or  two,  and  with  some 
unwarranted  assumptions,  one  of  which  is 
that  labor  organizations  have  been  able  to 
keep  up  the  rates  of  wages  for  the  past 
seventeen  or  eighteen  years,  and  another 
that  the  number  of  unemployed  persons 
is  sufficiently  large  to  offset  the  rate,  it 
being,  of  course,  true,  as  the  minority  say, 
that  "the  effect  of  an  appreciating  stand- 
ard of  value  can  never  be  determined 
by  considering  merely  the  quantity  of 
commodities  which  the  laboring  man 
who  happens  to  have  ^uor~k  can  buy  with  his 
dollar  when  he  gets  it."  Now,  we  may 
differ  in  opinion  as  to  the  power  of  labor 
organizations,  but  this  point  is  not  impor- 
tant, for  no  matter  how  the  rate  of  wages 
has  been  maintained,  if  the  rate  has  been 
maintained,  then  wage-earners  have  been 
benefited  by  the  fall  in  prices.  The  ques- 
tion of  the  power  of  labor  organizations 
does  not  enter  into  the  subject.  If  wages 
have  not  fallen  during  the  past  seventeen 
or  eighteen  years,  while  prices  of  every- 
thing which  the  wage-earner  buys  have 


68          Money,  Silver,  and  Finance. 

fallen,  then  the  wage-earner's  gain  is  proved 
beyond  question.  Those  who  think  that 
workmen  have  held  up  wages  through  the 
power  of  organization,  may  agree  with 
others  that  the  fact  of  wage-rates  being 
high,  while  prices  are  low,  is  evidence  that 
wage-earners  have  no  right  to  complain  of 
"  demonetization."  So  far  as  I  know,  the 
"  silverites  "  have  not  yet  claimed  that  labor 
could  have  been  organized  more  effectively 
but  for  "  demonetization  "  ! 

Without  offering  any  proof,  the  minority 
of  the  committee  assert :  "  We  do  know 
that  during  the  last  seventeen  or  eighteen 
years  an  unusually  large  number  of  men 
have  been  out  of  employment,  both  in 
Europe  and  America,  and  that  the  cry  of 
hard  times  has  been  heard  almost  con- 
tinuously throughout  the  whole  civilized 
world."  And  the  minority  say  too :  "  It 
will  be  admitted  by  everybody  that  the 
laboring  classes,  as  a  whole,  cannot  be 
permanently  prosperous  in  the  face  of 
general  business  depression.  It  will  also 
be  admitted,  we  presume,  that  the  period 
extending  from  1873  down  to  the  present 


Prices  and  Wages.  69 

time,  has  been  one  of  very  unusual 
depression  all  over  the  commercial  world." 
I  fear  that  the  minority  took  advantage 
of  the  feeling  of  depression  which  actually 
existed  at  the  time  the  report  was  made. 
This  period  extended  from  November, 

1890,  the  date  of  the  panic,  to  the  fall  of 

1891,  when  our  great  crops  were  assured. 
If  the  minority  were  to  use  their  language 
now,  some  people  would  be  ready  to  say : 
"No.      Times  have  been    both    bad    and 
good  since    1873;  they    were  quite   good 
from  1877  to  the  date  of  the  shooting  of 
Grarfield  in   1881,   and  to   the  occurrence 
of  general  drouth  in  that  year,  and  were 
so  good  in  1879,  that  <  the  boom-of  '79  '  was 
long  talked  about;  1886,  1887,  1889,  and 
1890  up  to  November  were  fairly  good 
years,  or  not  below  the  average ;  and  then 
in  the  fall  of  '91  plenty  of  people  made 
lots  of  money."     The  minority  should  have 
proved  their  assertion,  and  probably  would 
have  done  so,  if  possible,  by  showing  that 
pauperism  had  increased,  or  that  savings- 
bank  deposits  had  decreased,  for  such  evi- 
dence  is  necessary  to  bear   out  the  bald 


70          Money,  Silver,  and  Finance. 

statement  that    the  number  of  the  unem- 
ployed has  been  unusually  large. 

In  another  place  the  minority  contradict 
themselves  :  "  We  may  concede  that  since 
1873  there  has  been  a  large  increase  in  the 
production  of  the  great  staples  of  commerce ; 
but  whatever  the  increase  may  have  been 
the  commodities  have  all  been  consumed. 
There  is  no  accumulated  surplus  of  wheat, 
or  cotton  or  any  other  leading  staple." 
What  !  Depression  with  a  large  increase  in 
production  and  no  accumulation  ?  Who 
consumed  the  increased  product  ?  Neces- 
sarily the  working  population.  And  how 
could  the  workmen  have  obtained  the 
money  to  pay  for  the  increased  product 
except  by  being  well  employed  ?  The 
minority  should  have  compared  the  statis- 
tics of  the  seventeen  or  eighteen  years  with 
the  statistics  of  some  other  period  of  sev- 
enteen or  eighteen  years,  or  rather  the 
minority  should  have  compared  the  dozen 
years  following  January  1,  1879,  the  date 
of  specie  resumption,  with  another  period 
of  a  dozen  years,  for  between  1873  and 
1879  the  cheapening  of  silver  caused  silver 


Prices  and  Wages.  71 

coins  to  circulate,  to  some  extent,  alongside 
of  our  paper  money,  and  up  to  1879,  there- 
fore, the  declining  price  of  silver  operated 
to  augment  our  total  circulation.  The 
panics  of  '37,  '57,  and  '73  are  wholly  un- 
connected with  the  silver  question,  and  so 
are  the  years  of  depression  which  naturally 
followed  each  of  these  panics,  except- 
ing that  amelioration  may  have  come 
from  cheap  silver  after  1873.  Were  not 
'37,  and  '57  and  '73  as  severe  as  anything 
since  experienced  ?  Since  the  time  when 
"  demonetization  "  was  first  noticed  (years 
after  1873),  what  years  have  been  unpre- 
cedentedly  prolific  of  disaster  ? 

The  minority  have  lengthened  the  string 
of  unsupported  assertions  which  make  a 
basis  for  the  silver  theory :  "  Demonetiza- 
tion "  caused  the  decline  in  silver ;  the 
decline  in  all  prices  necessarily  followed; 
the  fall  in  prices  has  been  accompanied  by 
business  depression ;  business  depression 
keeps  an  unusually  large  number  of  men 
out  of  employment,  although,  strange  to 
say,  those  who  do  find  it  are  paid  good  rates ; 
and  a  large  increase  in  the  product  of  the 


72  Money,  Silver,  and  Finance. 

staple  articles  has,  somehow  or  other,  been 
consumed  without  anybody's  being  able  to 
see  how  in  the  world  the  consumers  have 
been  able  to  pay  for  this  product.  The 
truth  is,  that  since  1872  the  population 
of  the  world  has  been  better  fed,  better 
clothed,  and  better  sheltered  than  in  any 
previous  time.  One  of  this  same  minority 
has  lately  been  showing  how  particularly 
well  off  now  are  the  miners  in  a  commu- 
nity with  which  he  is  familiar.  I  take 
this  illustration,  because  the  "silverites" 
cannot  question  the  authority,  and  be- 
cause the  illustration  shows  in  a  most 
admirable  manner  that  the .  price  of  a 
product  may  decline  thirty  per  cent,  with- 
out affecting  the  prosperity  of  the  workmen 
engaged  in  producing  the  article.  If  the 
decline  in  the  market  price  of  silver  has 
not  worked  harm  to  silver  miners,  how 
can  this  decline  have  worked  harm  to 
laborers  in  any  industry  ?  Here  is  the 
charming  picture  of  a  happy  community, 
drawn  by  the  Hon.  Horace  F.  Bartine  of 
Nevada,  the  famous  silver  advocate.  I 
quote  from  his  letter  to  the  Engineering 


Prices  and  Wages.  73 

and  Mining  Journal,  issue  of  October  24, 
1891: 

"  Every  miner  in  the  employ  of  John  P. 
Jones,  or  any  other  mine  owner,  either  in 
Virginia  City  or  Gold  Hill,  is  paid  $4  a 
day  for  eight  hours'  work.  Men  working 
above  ground  receive  from  $3.50  to  $4. 
There  is  no  departure  from  these  rates. 

"  With  one  day's  wages  the  miner  can 
buy  100  Ibs.  of  the  best  flour  in  the  world ; 
or  7  bushels  of  the  finest  potatoes  ever 
grown ;  or  32  Ibs.  of  choice  beef ;  or  32 
Ibs.  of  prime  butter,  and  almost  everything 
else  in  proportion.  With  the  product  of 
a  month's  labor  he  can  pay  his  board  at  a 
first-class  restaurant  and  have  $94  left. 

"  I  ask  you  in  all  candor  how  that  com- 
pares with  the  condition  of  the  miner  or 
the  factory  hand  in  New  York  or  Pennsyl- 
vania, where  the  employers  generally  ex- 
press so  much  horror  and  indignation  at 
the  thought  of  the  laboring  man  being 
paid  in  '  80-cent  dollars '  ? 

"  The  Comstock  miner  thinks  nothing  of 
spending  $50  for  a  day's  amusement  at  a 
picnic.  This  may  not  be  suggestive  of 


74          Money,  Silver,  and  Finance. 

rigid  economy,  but  it  certainly  does  not 
show  that  he  is  being  shamefully  wronged 
by  his  employer.  There  are,  no  doubt, 
some  poor  people  there — sickness  and  mis- 
fortune invade  every  community. 

"  Attracted  by  the  high  wage-rate,  more 
men  go  there  than  can  find  employment; 
but  that  is  not  the  fault  of  the  mine  owners. 
They  employ  as  many  as  they  need,  and 
those  who  obtain  work  are  the  best  paid, 
best  fed,  best  clothed,  and  most  thoroughly 
independent  class  of  workingmen  to  be 
found  on  the  American  continent,  or  on 
the  surface  of  the  globe." 

And  yet,  Mr.  Bartine,  you  and  your 
friends  would  change  all  this  !  The  low 
prices  (excepting  for  picnics),  which  enable 
workmen  to  obtain  all  they  need  for  less 
money  than  they  can  easily  earn,  you  would 
change  to  high  prices,  so  that,  for  instance, 
the  miner  shall  be  unable  to  save  the 
"  $94,"  or  be  unable  ever  to  go  on  picnics 
at  all.  And  Mr.  Jones  and  other  mine 
owners,  whose  business  is  so  prosperous 
that  they  can  afford  to  pay  $3.50  to  $4  for 
eight  hours'  work,  want  the  United  States 


Prices  and  Wages.  75 

to  pay  thirty  per  cent,  more  for  silver  than 
any  other  government  will  give  for  it,  so 
that  the  prosperity  of  Mr.  Jones  and  other 
mine  owners  shall  be  further  enhanced ! 
Yes,  Mr.  Bartine  and  Mr.  Jones,  silver- 
mine  owners  do  pay  better  wages  than 
other  employers  can  afford  to  pay ;  but 
don't  you  think  that  mine  owners  and  their 
miners  already  have  a  fair  share  of  the 
country's  good  things  ?  What  ground  have 
you  for  asking  the  government  to  continue 
piling  up  silver  in  its  vaults  at  the  expense 
of  the  whole  tax-paying  public?1  And,  Mr. 
Bartine,  were  you  thinking  of  a  section  of 
the  country  with  which  you  are  less  famil- 
iar, when,  eight  months  before  you  wrote 
the  lines  above  quoted,  you  helped  to 
make  out  the  minority  report  and  agreed 
to  these  words  ?— 

"  Any  argument  based  upon  the  assumed 
fact  that  the  present  condition  is  favorable 
to  the  wage-worker,  because  he  can  buy 
more  commodities  with  his  daily  wage,  is 
utterly  fallacious,  and  fails  to  reach  the 
heart  of  the  question."  It  is  true  you  fol- 
low with  the  irrelevant  remark  about  labor 

*  The  Silver  Purchase  Law  was  then  in  force. 


76          Money,  Silver,  and  Finance. 

organizations ;  but  have  you  drawn  a  cor- 
rect picture  of  the  prosperity  of  Virginia 
City  and  Gold  Hill,  or  is  it  merely  an 
"assumed  fact  that  the  present  condition 
is  favorable  to  the  wage- worker  "  ?  Can 
wage-workers  there  obtain  such  a  quantity 
of  the  necessaries  of  life  "  with  one  day's 
wages,"  or  can  they  not  ?  Can  a  miner 
save  "  $94  "  in  a  month,  or  is  this  "utterly 
fallacious  "  ?  Or  will  Mr.  Bartine  and  his 
friends  produce  a  new  picture  of  real  pros- 
perity, according  to  their  own  ideas  ;  not  a 
picture  of  what  is  commonly  known  as 
prosperity — say,  high  wages,  low  cost  of 
living,  and  all  that — but  something  unique 
and  suitable  to  the  silver  question  ? 

Corroborative  of  Mr.  Bartine's  ideas, 
when  he  was  writing  about  the  miners,  is 
the  following  portion  of  an  editorial  in  the 
Engineering  and  Mining  Journal  of  Octo- 
ber 10,  1891 : 

"From  all  indications  the  production  of 
silver  in  this  country  will  be  considerably 
greater  this  year  than  in  1890.  Never 
before  has  there  been  so  much  activity  in 
all  the  silver-mining  camps  of  the  West  as 


Prices  and  Wages.  77 

at  present,  and  this  is  beginning  to  show 
in  the  greater  output  of  ore.  The  lead- 
smelters  of  Denver  and  Pueblo  are  pressed 
to  the  limit  of  their  capacity  to  reduce  the 
ore  of  this  class  which  is  offered,  and  there 
has  even  been  some  talk  of  the  erection  of 
new  works  at  the  latter  place.  The  pro- 
duction of  lead  ore  has  not,  apparently, 
increased,  but  the  smelters  are  running 
their  furnaces  on  low  lead  charges,  and  are 
thus  handling  the  greater  volume  of  diy 
ores. 

"The  general  prosperity  in  the  silver- 
mining  industry  throughout  the  West  is 
particularly  noticeable,  in  view  of  the 
general  business  depression  which  has 
made  itself  felt  throughout  the  past  year 
in  almost  all  branches  of  industry  in  the 
East." 

It  appears  from  this  that  the  mining 
industry  was  in  so  good  a  position  that  the 
panic  of  1890  had  little  or  no  effect  upon 
it.  That  panic  affected  many  other  indus- 
tries, but  it  is  too  early  yet  to  tell  whether 
the  injury  has  been  wholly  overcome  by 
the  great  crops  of  1891.  I  do  not  know, 


78          Money,  Silver,  and  Finance. 

however,  that  among  the  injured  industries 
there  has  been  any  important  reduction  in 
the  average  rate  of  wages,  or  that  there  has 
been  anywhere  an  important  increase  in  the 
number  of  unemployed  workmen.  The 
silver-mining  industry  is  in  an  exceptionally 
good  position,  but  if  industries  generally 
had  been  suffering  from  "seventeen  or 
eighteen  years"  of  depression, as  "silverites" 
charge,  then  these  industries  would  have 
had  no  strength  left  to  withstand  the  panic 
of  1890 ,  our  daily  papers  would  have  been 
filled  with  accounts  of  wholesale  reductions 
in  wages,  and  wholesale  discharges  of  work- 
men, and  accounts  of  numerous  failures 
everywhere.  From  whatever  cause,  or  in 
spite  of  any  cause,  the  industries  of  this 
country  are  certainly  in  a  fairly  sound  con- 
dition. The  decline  in  prices  is  the  only 
evidence  that  we  have  had  "  seventeen  or 
eighteen  years"  of  depression,  but  the  de- 
cline has  been  caused  by  natural  industrial 
development,  and  the  decline  in  prices  has 
been  accompanied  by  an  enormous  increase 
in  consumption,  an  increase  impossible 
whenever  there  is  real  depression.  During 


Prices  and  Wages.  79 

these  years  of  so-called  depression  the  wage- 
earner  generally  has  been  well  employed,  as 
proved  by  his  ability  to  purchase  and  con- 
sume, and  to-day  he  appears  to  be  best 
employed  in  what  should  be  our  most  de- 
pressed industry,  the  silver  industry  itself. 

1896.  The  general  depression  of  1893  and  later  years  was  severely 
felt  in  the  silver  mining  industry.  .Of  course  that  industry  was  un- 
favorably affected,  Nov.,  1893,  by  the  stopping  of  silver  purchasing 
on  the  part  of  the  United  States,  and  by  the  stopping  of  silver  coin- 
age by  the  mints  of  India,  June,  1893. 

NOTE  TO  FIFTH  EDITION.  —The  panic  of  1893,  and  the  trade  de- 
pression following  it,  are  treated  in  the  concluding  chapter.  It  is  now 
claimed  that  the  success  of  the  free-coinage  party  at  the  polls,  in 
1896,  would  cause  prices  to  advance  at  once;  but  as  such  success 
would  cause  financial  disturbance  and  industrial  depression,  and 
therefore  would  take  away  from  many  workmen  their  opportunities 
to  earn  money,  it  seems  clear  that  the  first  result  of  success  must  be 
a  decline  in  both  prices  and  wages.  The  prospect  of  actual  free- 
coinage  would  put  a  premium  on  gold,  and  there  would  soon  be  a 
corresponding  difference  between  gold  prices  and  silver  or  legal  ten- 
der prices,  similar  to  the  difference  between  gold  prices  and  paper 
prices  from  1862  to  1879;  but  whether  legal-tender  prices,  on  the 
average,  would  reach  a  higher  level  than  the  present  level,  say  within 
a  year  or  so  after  the  election,  is  problematical.  The  actual  passage 
of  a  free-coinage  law  would  be  doubtful,  or  at  least  far  off,  and  the 
gold  premium  would  fluctuate,  as  the  chances  seemed  good  or  bad. 
The  unquestionable  effect  of  the  success  of  the  Silver  Party  at  the 
polls  is  a  reduction  in  the  average  rate  of  wages  incident  to  indus- 
trial depression. 


CHAPTER  V. 

PRICES,    WAGES,    AND    LABOR-  SAVING 
MACHINERY. 

KEEPING  our  attention  upon  the  silver 
industry  a  moment  longer,  let  us  see  how 
it  is  that  the  price  of  silver  could  have 
gone  down  without  the  decline's  putting 
down  the  wages  of  silver  miners.  Mr. 
William  H.  Beck,  a  gentleman  connected 
with  the  mining  interests  of  Montana,  tes- 
tified before  the  committee  as  follows  : 

"In  my  observation  in  the  far  West,  I 
see  causes  there  that  I  think  are  tending 
very  much  to  depreciate  the  value  of  silver. 
When  I  went  to  Montana,  in  1886,  it  cost 
us  to  transport  our  ores  from  Dillon  to 
Omaha  $24  per  ton.  That  transportation 
now  costs  $10  a  ton.  It  cost  us  then  to 
treat  the  ores  $17  a  ton.  Now  it  costs  $8 
and  $10.  Mining  powder  cost  us  50  and 
60  cents  a  pound.  We  can  buy  it  now  foi 
80 


Labor -Saving  Machinery.  81 

20  and  22  cents  a  pound.  It  cost  us  then 
to  board  a  man  $1  a  clay  and  more.  We 
can  do  it  now  for  a  less  sum.  Machinery 
is  better,  and  improvements  in  mining  ma- 
chinery are  being  continually  made.  Con- 
centration of  ores  is  extending  very  largely. 
Many  of  our  ores  that  were  considered  of 
no  value  a  few  years  ago  are  now  quite 
profitable. 

"  When  I  first  went  to  Colorado,  in  1878,' 
the  superintendent  of  a  silver  mill  at 
Georgetown  told  me  that  he  could  not 
afford  to  treat  ores  that  assayed  less  than 
$20  to  the  ton.  By  concentration,  ones  can 
now  be  profitably  handled  that  yield  as  low 
as  $5  a  ton.  By  using  scientific  processes 
of  treatment,  low-grade  ores,  running  2  or 
3  ounces  of  silver  and  3  or  4  or  5  per  cent, 
in  lead,  will  yield  a  good  profit.  In  1889 
I  went  to  Patricroft,  about  15  miles  from 
Manchester,  England,  and  spoke  with  the 
owner  of  a  large  smelter  located  at  that 
place.  He  showed  me  a  lot  of  ores,  and 
finally  some  slag,  which  he  stated  worried 
him,  as  he  would  have  to  melt  it  over 
again.  He  said  that  it  carried  1  ounce 


82          Money,  Silver,  and  Finance. 

of  silver  to  the  ton.  I  said,  *  Can  you  de= 
rive  any  profit  from  melting  that  down  for 
1  ounce  of  silver  ? '  and  he  said,  '  Yes,  there 
is  a  small  profit.'  What  an  immense  field 
there  is  when  you  can  handle  cheaply  low- 
grade  ores," 

It  should  be  noticed  that  Mr.  Beck  says 
nothing  about  any  reduction  in  the  rate  of 
wages  paid  to  silver  miners.  Apparently 
there  has  been  no  reduction,  and  certainly, 
there  was  no  necessity  for  a  reduction  in 
wages.  The  decline  in  the  cost  of  mining 
silver  is  accounted  for  in  the  same  way 
that  we  have  to  account  for  the  decline  in 
the  cost  of  producing  other  articles — gen- 
eral improvement  in  processes.  The  lower 
cost  means  neither  lower  profits  nor  lower 
wages,  nor  is  there  in  the  lower  cost  any 
evidence  of  hard  times.  If  the  minority  of 
the  committee  could  have  shown  that  silver- 
mining  has  become  unprofitable,  that  wages 
have  been  reduced,  or  that  miners  are  unable 
to  find  employment,  the  minority  would 
have  done  so.  In  the  absence  of  further 
evidence  it  is  fair  to  say  that  the  silver- 
mining  industry  itself  denies  the  statement 


Labor-  Saving  Machinery. 


that  we  have  passed  through  "  seventeen  or 
eighteen  years  "  of  business  depression. 

Hon.  Joseph  H.  Walker,  of  Massachu- 
setts, a  member  of  the  majority  of  the  com- 
mittee, in  cross-examining  Mr.  Francis  G. 
Newlands,  of  Nevada,  said  : 

"  I  hand  you  this  table  of  prices,  in 
bushels  of  grain,  as  an  answer  to  your  as- 
sertion that  the  farmers  are  suffering  from 
a  depression  of  prices.  This  shows  that 
their  products,  bushel  for  bushel,  will  buy 
more  than  ever  before  "  : 

Prices  agreed  upon  by  Messrs.  Kingsland&  Douglas, 
successors  of  Kingsland,  Fergeson,  6°  Co.,  Sim- 
mons Hardware  Company,  and  Mansur  &>  Tibbetts 
Implement  Company,  all  of  St.  Louis,  Mo. 


Implements. 

Money  in  — 

1889,  in  bushels  of— 

1873,  in  bushels  of— 

1889. 

1873. 

Wheat. 

Corn. 

Oats. 

Wheat. 

Corn. 

Oats. 

One-horse      steel 

plow  (wood  beam) 
Two  -  horse    steel 

$2.75 

$6.50 

3-8 

8.5 

11.5 

6.4 

19.1 

27.0 

plow  (wood  beam) 
One  -  horse      iron 

I2.OO 

20.CO 

16.4 

37-5 

50.0 

19.6 

58.8 

83-3 

plow  (wood  beam) 
Two  -  horse      iron 

2.00 

5.00 

2.7 

6.2 

8-3 

4-9 

14.7 

20.8 

plow  (wood  beam) 
Two  -  horse     side 

8.00 

I3.OO 

10.9 

25.0 

33-3 

12.7 

38-2 

54-i 

hill  or  reversible 

plow  
One  potato  digger. 
Old-fashioned 

10.00 

7-5° 

iS.OO 
20.00 

13-7 

10.2 

31.2 
23-4 

41.7 
31-2 

17.6 

19.6 

52 

75-0 
83-3 

tooth  harrow    . 
One-horse    culti- 

6.50 

15.00 

8.9 

20.3 

27.0 

14.7 

44.1 

62.5 

vator  

3-50 

7-00 

4-7 

10.9 

H-5 

6.8 

20.5 

29.1 

Two  -  horse     corn 

cultivator    .     .     . 

I5.ro 

28.00 

ao.«? 

46  8 

625 

27.4 

82.4  1  116.6 

84  Money,  Silver,  and  Finance. 


Implements. 

Money  in— 

1889.  in  bushels  of— 

1873,  in  bushels  of— 

4* 

1873. 

Wheat. 

Corn.      Oats 

Wheat. 

Corn. 

Oats. 

One-horse  mowing 

machine. 

45-co 

85.00 

616 

140.6      187.5 

83-3 

250.0 

354-1 

Two-horse     mow- 

ing machine     .     . 
Horse  rake(svlky) 

50.00 

20.00 

90.00 
30.00 

68.5 
27.4 

156.2       208.3 
62.5         83.3 

88.2 
29.4 

264.7 
88.2 

375-0 
125.0 

Common  Hunt 

rake  (horse)     .     . 

3-50 

6.50 

4.8 

10.9 

H-5 

6-3 

19.1 

27.0 

Common  iron  gar- 

den rake  (lo-tooth 

steel)  (dozen)  .     . 

3-75 

12.  oo:     5.1 

11.7         15.6 

11.7 

35-2 

50.0 

One-horse    horse- 

power     .... 
Two-horse    horse- 

25.00 

45.00       34.2 

78.1        104.1 

44.1 

132.3 

187.5 

power  

35-oo 

65.00 

(*) 

(*) 

(*) 

(*) 

(*) 

(*) 

Reaper      .     .     .     .     75.00 

95.00 

(*) 

(*) 

(*) 

(*) 

(*) 

Hinder  135.00 

184.9 

421.8 

562.5 

l277-7 

'769-2 

'857.1 

Cornsheller      (one 

hole)  6.00 

II.5C 

8.2 

18.7 

25.0 

II.  2 

33-8 

47-9 

Fanning  mill     .     .     15.00 
Common  hose  (cast! 

25.00 

20.5 

46.8 

62.5 

24-5 

73-5 

104.1 

steel  socket),  per 

dozen  
Common  rakes 

3-5° 

6.50 

4'7 

10.9 

14-5 

6-3 

19.1 

27.0 

-    (wood),  per  dozen 

2.OO 

3.OC 

2.4 

6.2 

8-3 

2.9 

8.8 

12-5 

Scythes      (Ames's 

grass),  per  dozen. 

7-50 

16.00 

10.2 

23.4 

31.2 

15-7 

47.0 

66.6 

Scythes      (Ames's 

grass),  per  dozen. 
Scythe  snaths  (pa- 

9-50 

,,00 

(*) 

(*) 

(*) 

(*) 

(*) 

(*) 

tent),  per  dozen    . 

4.50     ii.  oo 

6.1 

14.0 

18.7 

10.8 

32-3 

45-8 

Shovel  (Ames),  per 

dozen      .     .     .     .       9.50     18.00 

13.0 

29.6 

39-5 

17.6 

52.9 

75-0 

Spades   (Ames), 

per  dozen    .     .     .      10.00     18.50 
Crowbars  (steel)    .         .06      — 

91 

31.2 

(*) 

41.6 
(*) 

18.1 
(*) 

W 

27.0 

(*) 

Crowbars  (iron)     .         .05         .10 

.06 

.I5                .2 

.09 

.29 

.46 

It  will  be  observed  that  there  is  not  in 
these  figures  any  ground  for  asserting  that 
farmers  cannot  afford  to  pay  as  much 
money  to  their  workmen  as  in  1873. 

The  following  tables  also  were  sub- 
mitted by  Mr.  Walker : 


For  1880. 


Labor-  Saving  Machinery. 


Wages  in  1860  and  in  1885  in  dollars  and  in  weight 
of  gold  and  in  grains. 


.   Workmen. 

Wages  in 
dollars. 

Wages  in 
grains  of  gold. 

Grains 
of  gold 
percent- 
age of 
increase 

1860. 

I88S. 

1860. 

I885. 

Factory  hands  : 

Dyers       ...... 

$0.62 

$1.00 

16.0 

25-7 

61 

Giggers   

.62 

.82 

16.0 

21.  1 

32 

Shearers 

60 

17  8 

2c  g 

AC 

Plain  weavers          . 

-65 

'.85 

17.0 
16.7 

25.0 
21.8 

4i> 

Spinners           

I.IO 

1.26 

28.3 

32-5 

15 

Miscellaneous  : 

Leather   factory  beam  and  yard 

hands        .... 
Leather    factory    whiteners    and 

I.IO 

1.67 

31.0 

43.0 

39 

skivers      

1.83 

2-75 

47.2 

70.8 

5° 

Common  laborers                     . 

I.OO 

1.50 

25.8 

38.7 

5° 

Blacksmiths 

I    CO 

2.OO 

*8  7 

<i  6 

00 

Blacksmiths'  strikers     . 

I.OO 

1.50 

JQ'I 

25-8 

5-i.u 

27.0 

J  J 

5° 

Carpenters 

1.67 

1.75 

2.00 

2.25 

43-0 
45-1 

51-6 

57-7 

20 

28 

Machinists       . 

Locomotive  engineers    . 
Locomotive  firemen 

2.40 

1.20 

3.20 

62.0 
31.0 

82.4 
45.2 

$ 

Average  percentage  of  increase  in 
weight  of  gold        .         .         38 

Wages  in   1860  and  1885  in  current  money  and  in 
grains  of  fine  silver. 


Wages  in 

Percent- 

grains of  fine 

age  of  in- 

Workmen. 

Wages 
in  1860. 

Wages 
in  1885. 

silver  in— 

crease  of 
wages  in 
grains   of 

1860. 

1885. 

fine  silver 

since  1860 

Dyers 

$0.62 
.62 

$1.00 

.82 

255-7 

5*5-6 
422.8 

IOI.6 

Giggers     ...... 

Shearers    ...... 

.69 

I.OO 

284.6 

5T5-6 

82.0 

Plain  weavers  

.65 

.85 

268.1 

438.2 

63.4 

Spinners    ...... 
Leather   factory    beam    and   yard 

I.IO 

1.26 

453-7 

649.6 

hands          

1.20 

1.67 

495-0 

861.1 

74-Q 

Leather    factory,    whiteners     and 

skivers        
Common  laborers      .... 
Blacksmiths      .        .        .        .        . 
Blacksmiths'  strikers 

1.83 
I.OO 

1.50 

I.OO 

2.75 
1.50 

2.OO 

1-50 

754-9 
412.5 
618.7 
412.5 

1,418.2 
772.4 
1,031.2 
773-4 

87.8 
87.4 
66.6 
87.4 

Carpenters                                   . 

T  67 

2.OO 
2.25 

688.9 
721.9 

1,031.2 
1,160.0 

52-5 
70  3 

Machinists         

T-75 

Locomotive  engineers       .         .         . 
Locomotive  firemen. 

2.40 
i.  20 

3-20 

990.0 
495-o 

1,650.0 
902.4 

66.6 
82.3 

Average  increase  of  wages  received  in  ounces  of  fine  silver  over  ounces 
received  in  1860  is  63  per  cent. 


86          Money,  Silver,  and  Finance. 

It  should  be  remembered  that  general 
business  was  not  more  active  in  1885  than 
in  I860,  allowing  for  the  fact  that  the  in- 
dustries of  the  country  were  upon  a  far 
more  advanced  plane  in  1885  than  in  1860. 

Mr.  Edward  Atkinson,  of  Boston,  the 
eminent  writer  and  statistician,  testified : 
"Prices  have  gone  down,  it  is  true; 
but  if  they  had  not,  consumers  would  not 
have  shared  the  benefit  of  the  vast  im- 
provements and  inventions  which  have 
been  applied  in  the  last  twenty-five  years — 
greater  during  the  last  twenty-five  years, 
especially  in  the  processes  of  agriculture, 
than  ever  before.  The  wage  of  labor  is 
now  higher  than  at  the  highest  period  of 
inflation  in  1865,  and  the  workman  can 
buy  a  great  deal  more  food,  fuel,  clothing, 
and  shelter  for  each  dollar."  I  take 
pleasure  in  recommending,  here,  to  the 
reader  who  is  interested  in  the  phenomenon 
— decline  in  prices,  advance  in  wages, — Mr. 
Atkinson's  Tlie  Industrial  Progress  of  the 
Nation.  In  the  chapter,  Progress  from 
Poverty,  Mr.  Atkinson  backs  up  with  sta- 
tistics this  remark : 


Labor- Saving  Machinery.  87 

"  It  may  be  apparent  from  tlie  data  that 
I  have  submitted,  that  this  period  of  steady 
reduction  in  prices  since  the  end  of  the 
Civil  War  has  been  in  fact  a  period  of  the 
greatest  progress  in  material  welfare  ever 
witnessed  in  this  or  in  any  other  country. 
The  temporary  difficulties,  local  distress, 
and  congestion  of  labor,  limited  mainly  to 
some  of  our  great  cities,  have  been  mere 
incidents  in  the  adjustment  of  society  to 
new  conditions  of  an  assured  abundance, 
such  as  were  never  before  achieved.  It 
has  happened  that  there  has  been  tempor- 
ary want  in  the  midst  of  general  plenty 
and  welfare ;  but  this  want  has  been  lim- 
ited to  a  very  few  conspicuous  points, 
where  it  has  perhaps  attracted  more  atten- 
tion than  its  proportion  called  for." 

I  might  continue  to  offer  authorities  and 
evidence  concerning  the  advance  in  wages 
and  the  decline  in  prices  which  have 
marked  the  past  quarter  of  a  century.  I 
do  not  think,  however,  that  further  argu- 
ment on  the  question  of  fact  can  be  needed. 
It  may  be  asked,  though :  If  prices  have 
been  put  down  by  the  use,  largely,  of  labor- 


Money,  Silver,  and  Finance. 

saving  machines,  how  is  it  that  the  rates 
of  labor  have  not  gone  down ;  how  is 
it  that  a  machine  which  enables  the 
employer  to  accomplish  as  much  with 
ten  men,  for  instance,  as  he  formerly 
could  with  twenty  men,  does  not  neces- 
sarily cause  ten  men  to  be  thrown  out 
of  employment,  and  so  help  to  reduce  the 
average  rate  of  wages  ? 

The  assumption  that  a  machine  which 
saves  labor  necessarily  throws  laborers 
out  of  employment  has  been  the  cause  of 
the  destruction  of  machines  by  mob- 
violence,  at  different  times,  in  most  parts 
of  the  world,  the  extent  of  destruc- 
tion being  in  proportion  to  the  prevalence 
of  ignorance.  It  is  an  unquestionable  fact, 
however,  that  the  average  rate  of  wages  is 
highest  to-day  in  those  countries  which 
most  generally  use  labor-saving  machines. 
Of  course  a  high  wage-rate  stimulates  the 
invention  of  labor-saving  machinery,  but 
as  a  matter  of  fact,  not  mere  theory,  labor- 
saving  machinery  does  not  reduce  wage- 
rates.  Let  us  look  more  closely  into  this 
subject,  first  considering  the  value  of  a 


Labor-Saving  Machinery.  89 

man's  time  when  using  a  machine,  compared 
to  the  value  when  not  using  a  machine. 
The  difference  will  show  that  an  employer 
who  has  machinery  can  afford  to  pay  more 
money  to  each  one  of  his  workmen  than  an 
employer  who  has  not  the  machinery  can 
afford  to  pay,  other  things  being  equal. 

In  1888  I  had  an  opportunity  to  observe 
the  harvesting  of  grain  in  many  parts  of 
France  and  Germany,  and  I  am  sure  that 
next  to  picturesqueness  the  most  striking 
feature  of  the  long  lines  of  blue-bloused 
peasants  working  with  scythes  and  sickles 
is  the  enormous  waste  of  time  or  labor. 
What  a  hundred  men  and  women  were 
accomplishing  in  a  day  could  have  been  ac- 
complished, by  about  ten  men,  assisted  by 
mowing  and  reaping  machines.  Actually, 
in  America,  ten  men  were  harvesting  as 
much  grain  in  a  day  as  one  hundred  men 
and  women  were  harvesting  in  France  or 
Germany.  Or  to  put  the  case  more  in  ex- 
act accord  with  the  facts,  the  harvesting  of 
the  grain  on  one  thousand  acres  of  land  in 
our  far  West  requires  no  greater  ni&nber  of 
hands  than  the  harvesting  of  the  grain  on 


90          Money,  Silver,  and  Finance* 

one  hundred  acres  of  laud  in  France  or 
Germany.  Making  due  allowance  for  the 
cost  of  machinery,  there  can  be  no  question 
that  the  American  farmer  can  afford  to  pay 
more  money  to  each  one  of  "his  workmen 
than  the  foreigner  can  afford  to  pay  to 
each  one  of  his  workmen.  These  different- 
ly situated  farmers  obtain  similar  sums  of 
money  for  their  crops  per  acre,  and  each 
farmer  can  afford  to  pay  out  from  his  re- 
ceipts a  similar  portion  for  labor,  but  in 
one  case  that  portion,  less  the  cost  of 
using  machinery,  is  divided  among  ten  per- 
sons, while  in  the  other  case  that  portion 
must  be  divided  among  one  hundred  per- 
sons.1 The  invention  and  use  of  agricult- 
ural machinery,  then,  enables  farmers  in 
America  to  pay  high  rates  to  individual 
workmen  because  more  work  can  be  done 
in  a  given  time  with  machines  than  without 
them.  In  other  words  a  labor-saving 
machine  multiplies  the  value  of  the  indi- 
vidual laborer.  And  the  fact  that  a  farmer 

1  The  proportion  of  ten  to  one  hundred  is  not  supposed  to 
be  perfectly  accurate,  the  intention  being  to  show  merely  that 
a  few  Americans  do  as  much  work,  in  a  given  time,  as  is  done 
by  many  Frenchmen  or  Germans. 


Labor- Saving  Machinery.  91 

can  afford  to  pay  high  wage-rates  (compared 
with  European  rates)  makes  it  necessary  that 
he  shall  actually  pay  high  rates,  for  the  value 
of  a  man's  labor  is  not  wholly  unknown  to 
himself,  and  the  farm-owning  class  is  being 
continually  recruited  from  the  farm-labor- 
ing class.  There  is  competition  among 
farmers  for  laborers,  and  there  is  a  desire 
on  the  part  of  the  laborers  to  better  their 
condition.  An  upward  step  is  more  easily 
taken  here  than  abroad,  and  to  keep  labor- 
ers in  the  laboring  class  the  American  farmer 
must  offer  inducements.  The  upward  step  is 
not  so  easily  taken  where  the  laborer  must 
step  into  the  ownership  of  a  very  large 
farm,  instead  of  into  the  ownership  of  a 
small  farm.  But  large  farms  need  many 
men  who  have  both  judgment  and  muscle, 
and  the  most  capable  become  farm-owners. 
Certainly  the  extensive  use  of  agricultural 
machinery  enables  American  farmers  to 
pay— and  forces  them  to  pay — higher  wages 
than  European  farmers  are  able  to  pay, 
or  are  obliged  to  pay.  The  words  can  and 
must  are  nearly  interchangeable  in  this  re- 
gard. 


92  Money,  Silver,  and  Einance. 

In  Italy,  I  saw  people  treading  on  the 
grapes  in  order  to  press  out  the  juice. 
Could  you  pay  as  much  money  to  each  one 
of  twenty  men,  employed  in  this  way,  as 
you  could  pay  to  each  of  two  or  three  men 
using  a  modern  press  ? 

In  the  factories  everywhere  on  the  Con- 
tinent you  see  a  similar  lack  of  facilities 
for  obtaining  good  results  from  the  use  of 
labor;  and  everywhere  labor  is  poorly 
paid,  because  the  results  do  not  enable  em- 
ployers to  pay  high  rates.  You  cannot 
pay  money  for  wages  except  you  receive 
money  from  the  sale  of  your  product,  and 
you  can  receive  money  from  the  sale  of 
your  product  only,  as  a  rule,  in  competition 
with  other  producers.  You  can  use  for 
labor  as  much  of  your  receipts  as  your 
competitors  can  use,  but  they  can  afford  to 
pay  to  each  "workman  more  than  you  can 
pay  to  each  workman,  if  their  workmen 
accomplish  more,  individually,  than  your 
workmen  accomplish. 

We  must  not  jump  to  the  conclusion 
that  the  rate  of  wages  should  be,  for  in- 
stance, five  times  as  high  in  the  place  where 


Labor- Saving  Machinery.  93 

ten  men  work  as  in  the  place  where  fifty 
men  work,  'to  accomplish  similar  results. 
A  portion  of  the  difference  goes  to  capital, 
in  the  way  of  higher  interest ;  a  portion 
goes  for  higher  rent,  a  portion  for  higher 
profits,  a  portion  for  higher  salaries,  and  a 
portion  may  go  to  the  inventor  of  a  machine. 
Then  the  apparent  difference  is  partly 
wiped  out  by  a  reduction  in  the  price  of 
the  product,  but  the  workman  can  and 
does  obtain  a  fair  share  of  the  benefit 
derived  from  using  labor-saving  ma- 
chinery. 

Let  me  try  to  illustrate.  A  labor-saving 
machine — one  which  promises  to  enable 
ten  men  to  do  what  fifty  men  are  in  the 
habit  of  doing — is  brought  to  the  attention 
of  the  proprietors  of  a  large  manufactory. 
Careful  investigation  leads  to  the  purchase, 
the  managers  of  the  works  being  fully 
convinced  that  this  particular  machine  will 
prove  valuable,  although  somewhat  similar 
machines  have  proved  "  expensive  luxuries.* 
Entering  the  building,  later,  we  find  the 
machine  set  up,  and  the  inventor  or  his 


94          Money,  Silver,  and  Finance. 

agent  making  it  go,  but  with  the  assistance 
of  a  bright  employee  who  has  been  selected 
to  have  charge  of  the  machine.  To  sup- 
pose that  this  bright  employee  has  no 
visions  of  an  advance  in  his  own  wages 
following  success  in  his  advanced  position, 
is  to  suppose  that  he  is  not  a  bright  em- 
ployee. Indeed,  the  proprietors  or  the  super- 
intendent may  promise  an  advance  in  wages, 
thus  hoping  to  obtain  the  best  of  care  and 
attention,  and  to  reduce  the  risk  of  loss, 
natural  in  the  operation  of  a  new  machine. 
Even  the  nine  men  who  have  been  chosen 
to  help  the  one  first  selected  will  expect  to 
be  paid  a  higher  rate  of  wages  than  when 
doing  less  important  work. 

The  machine  proves  to  be  as  good  as 
promised.  Ten  men  now  do  as  much  as 
fifty  men  could  do  before  the  machine  was 
introduced ;  and  the  managers  of  this  fac- 
tory will  see  the  wisdom  of  paying  these 
men  a  higher  rate  of  wages,  for  if  the  rate 
be  not  advanced,  a  competing  factory,  just 
introducing  the  machine,  will  pay  the  neces- 
sary rate  in  order  to  obtain  the  services  of 
men  who  know  how  to  use  the  machine. 


Labor-Saving  Machinery.  95 

The  value  of  the  men's  time  has  been 
enhanced,  and  this  is  known  both  to  em- 
ployers and  to  employees.  But  if  ten  men 
are  now  to  do  as  much  as  fifty  men  did, 
what  becomes  of  the  forty  men  who  were 
discharged  ?  Well,  the  assumption  that 
they  were  discharged  is  merely  an  assump- 
tion based,  perhaps,  upon  another  assump- 
tion that  this  manufactory  is  to  produce  a 
certain  quantity  of  goods  and  no  more. 
On  the  contrary,  however,  a  few  additional 
men  may  be  employed. 

The  new  position  of  this  manufactory, 
in  the  struggle  with  competing  manufac- 
tories, cannot  be  described  as  one  where 
less  money  is  given  to  individual  workmen 
or  to  the  whole  working  force :  the  posi- 
tion attained  by  progressive  management 
means  more  money  to  workmen,  but  still 
greater  results  from  the  expenditure,  these 
overbalancing  the  enhanced  wage-rate; 
the  new  position  means  the  ability  to  put 
more  goods  on  the  market,  and  at  a  reduced 
cost ;  and  generally,  it  means  a  reduction 
in  the  selling  price  of  the  goods,  in  order 
to  broaden  the  market  for  them.  I  think 


96          Money,  Silver,  and  Finance. 

this  a  fair  illustration  of  the  way  labor- 
saving  machines  augment  production  and 
necessitate  reductions  in  prices,  in  order  to 
make  possible  the  sale  of  the  increased 
product,  and  both  of  these  without  causing 
wages  to  be  lowered.  Reductions  in  the 
force  of  help  in  a  factory  because  of  the 
introduction  of  a  labor-saving  machine  are 
not  unknown,  but  I  believe  such  cases  are 
exceptional. 

Reductions  in  the  force  of  help  in  a 
factory  because  competing  factories  have 
introduced  labor-saving  machinery  are 
more  common  ;  and;  in  the  factories  which 
are  forced  into  a  secondary  place,  there 
may  be  both  a  reduction  in  the  number  of 
hands  and  a  reduction  in  the  rate  of  wages, 
but  an  important  distinction  should  be 
noticed4  The  progressive  factory  has 
taken  steps  which  lead  toward  the  absorp- 
tion of  the  non-progressive  factory's  busi- 
ness, and  in  time  the  progressive  factory, 
assisted  by  other  labor-saving  machines, 
may  reach  the  point  where  it  will  employ 
most  of  the  skilful  workmen  in  its  line, 
pay  higher  wages  than  other  factories,  turn 


Labor -Saving  Machinery.  97 

out  more  goods,  turn  out  goods  of  better 
quality,  and  be  able  to  sell  goods  at  a 
profit  while  other  factories  are  getting  no 
profit  or,  perhaps,  are  making  a  loss. 

Both  in  farming  and  in  manufacturing 
success  is  achieved  by  the  use  of  high- 
priced  laborers,  such  as  are  able  to  work 
with  machinery,  and  in  this  way  the  mar- 
ket prices  of  almost  everything  are  reduced. 
Scarcely  ever  does  an  employer  reduce  his 
wage-rate  in  order  to  lower  the  prices  of 
his  product.  That  would  be  working 
backward.  If  obliged  by  competition  to 
reduce  his  wage-rate  it  would  be  as  a  last 
resort,  for  he  knows  that  dissatisfaction 
among  his  men  may  result  in  cutting  down 
his  product  of  goods  and  in  losing  his  best 
men.  If  beaten  by  competitors,  he  must 
adopt  their  ways,  or  find  out  still  better 
ways  for  himself.  He  may  increase  his 
product,  and  by  so  doing  make  just  as 
much  money,  but  with  a  lower  percentage 
of  profit ;  he  may  buy  materials  to  better 
advantage  ;  he  may  stop  waste ;  he  may  be 
satisfied  with  a  lower  rate  of  dividend  or 
interest  or  profit ;  he  may  twist  and  turn 

7 


98  Money,  Silver,  and  Finance. 

about  in  every  conceivable  way  to  put 
himself  on  the  level  of  his  competitors, 
but,  generally  ppeaking,  if  he  reduce  his 
wage-rate  or  the  number  of  his  workmen 
he  will  jump  from  the  frying-pan  into  the 
fire.  The  natural  road  to  low  cost,  and, 
therefore,  the  ability  to  sell  at  low  prices, 
is  through  machinery  and  high  wages.  In 
some  countries  the  traditional  penny  a  day 
is  still  the  rate  of  wages,  and  in  those 
countries,  doubtless,  this  little  sum  may 
be  as  much  as  employers  can  afford  to  pay, 
for  employers  who  have  the  benefit  of  this 
nominally  cheap  labor  are  not  beating 
employers  elsewhere,  except  as  helped  by 
climatic  peculiarities.  The  rate  of  wages 
per  day  is  of  no  importance  to  employers; 
the  rate  of  wages,  or  the  sum  paid  in 
wages,  in  proportion  to  results,  is  all- 
important. 

But  even  if  successful  employers  do  pay 
high  wages,  still,  do  not  labor-saving 
machines  take  the  place  of  some  laborers, 
considering  the  country  as  a  whole  ?  A 
small  number  of  men  accomplish  as  much 
as  formerly  was  accomplished  by  a  large 


Labor- Saving  Machinery.  99 

number.  Where  are  these  now  useless 
men?  Again  we  have  an  assumption  to 
deal  with.  Instead  of  a  small  number  of 
men  now  doing  what  a  large  number  used 
to  do,  a  larger  number  of  men  are  doing 
much  more  than  the  increase  in  number 
would  indicate.  The  cheapening  of  goods 
by  the  use  of  machinery  has  brought  more 
and  more  goods,  in  greater  variety,  within 
the  reach  of  a  constantly  growing  number  of 
buyers,  extending  over  vast  territories,  and 
continually  advancing  in  power  to  buy  and 
in  desire  to  consume.  Who  now  'is  satis- 
fied with  only  so  much  as  satisfied  his 
father  ?  Who  cannot  see  that  the  luxuries 
of  yesterday  are  the  necessities  of  to-day  ? 
Progress  means  an  ever  increasing  demand 
for  new  goods  and  more  goods  and  an  ever 
increasing  ability  to  obtain  them. 

And  no  class  in  the  community  is  so  sure 
to  be  benefited  by  a  progressive  industrial 
movement  as  is  the  wage-earning  class,  for 
not  only  is  it  natural  that  prices  should  go 
down,  but  it  is  natural  that  wages  should 
go  up.  And  this  is  merely  showing  that 
the  theory  of  progress  agrees  with  the  facts 


i  oo        Money,  Silver ',  and  Finance. 

as  we  know  them.  How  absurd,  then,  it 
is  to  charge  that  "  demonetization  "  has  put 
prices  down,  and  what  folly  it  is  to  talk  of 
the  community's  having  been  injured  by 
adverse  silver  legislation ! 


CHAPTER  VI. 


THE    DEBTOR    CLASS." 


ALL  popular  movements  for  cheap  money 
or  to  make  money  more  plentiful  are 
strengthened  by  a  good-natured  desire  to 
help  along  the  debtors, — and  it  is  commonly 
supposed  that  a  large  proportion  of  the 
community  belong  to  this  class.  Therefore, 
if  it  were  made  clear  to  the  people  that 
debtors,  properly  so-called,  are  not  com- 
paratively numerous,  and  also  that  a  pro- 
cess of  money-cheapening  would  not  be 
likely  to  help  them,  we  should  have  little 
cause  to  fear  the  enacting  of  bad  financial 
measures.  These  would  be  too  unpopular 
to  obtain  the  sanction  of  law. 

The  greater  number  of  people  in  this  coun- 
try, as  in  every  country,  are  wage-  or  salary- 
earners,  and  all  of  them  are  creditors,  for 
the  simple  reason  that  they  are  not  paid  in 
advance.  You  give  your  time  and  labor 


101 


IO2        Money,  Silver,  and  Finance. 

to  your  employer,  and  only  after  the  debt 
to  you  has  accrued  for  a  specified  time  are 
you  paid  off.  Your  interest  lies  in  receiv- 
ing the  more  valuable  kind  of  money, 
where  two  kinds  circulate.  If  you  have 
been  thrifty  and  have  a  credit  at  the  sav- 
ings-bank, this  sum  too  you  want  payable 
in  the  better  money;  you  cannot  be  bene- 
fited by  a  law  which  would  compel  savings- 
banks  to  receive  depreciated  money  in 
settlement  of  mortgages,  and  therefore 
necessarily  permit  the  payment  of  depre- 
ciated money,  by  savings-banks,  to  you. 
If  you  have  no  money  saved  up,  but  are  in 
the  habit  of  living  from  hand  to  mouth, 
still  it  cannot  help  you  to  receive  your 
wages  in  inferior  money  just  for  the  pur. 
pose  of  handing  over  this  kind  to  the 
butcher  and  the  grocer.  Indeed,  may  not 
the  talk  of  cheap  money  lead  these  men 
into  trying  to  charge  you  more  for  the 
necessaries  of  life,  even  if  a  financial  dis- 
turbance should  prevent  the  wholesale 
butchers  and  grocers  from  advancing  their 
prices?  If  prices  should  advance  because 
of  free  coinage,  as  "  silverites  "  expect,  most 


"  The  Debtor  Class."  103 

assuredly  wages  will  be  a  long  way  behind 
in  the  upward  movement.  The  crisis  in 
financial  affairs  would  have  the  effect  of 
injuring  the  industries  of  the  nation ; 
and  at  the  same  moment  of  time  you  might 
possibly  witness  an  attempt  to  advance  the 
average  of  prices,  particularly  retail  prices, 
and  an  attempt  to  reduce  the  average  rate 
of  wages.  Of  course  there  would  come 
about  an  approximate  adjustment  of  the 
relation  between  prices  and  wages,  but  if 
prices  should  go  up  they  would  move  much 
faster  than  wages  would  move.  Prices 
could  go  up  a  little  without  any  accom- 
panying or  following  advance  in  wages. 
Most  certainly,  therefore,  clerks  and  labor- 
ers cannot  be  classed  with  those  debtors 
who  are  supposed  to  be  in  need  of  cheaper 
money,  and  if  we  leave  wage-  or  salary- 
earners  and  their  families  out  of  account, 
we  are  compelled  to  search  among  the 
minority  of  the  population  for  the  future 
beneficiaries  of  cheap  money. 

Of  course  the  greatest  borrowers,  and 
therefore  the  greatest  debtors,  are  the  na- 
tional, state,  and  municipal  governments, 


IO4        Money,  Silver,  and  Finance. 

but  we  need  waste  no  time  on  them,  for 
nobody  wants  tkem  to  pay  debts  in  silvel 
and  to  collect  taxes  in  gold. 

And  sympathy  is  not  asked  for  the 
banking,  railway,  and  industrial  corpora- 
tions which  stagger  under  millions  and 
millions  of  debt,  the  managing  financiers 
haying  made  no  sign  that  relief  is  sought 
in  cheaper  money.  On  the  contrary,  these 
officers  dread  as  their  most  dangerous  foes 

o 

any  disturbers  of  confidence  in  the  stability 
of  the  general  financial  situation. 

Many  merchants  are  chronic  borrowers, 
but  the  smallest  possible  percentage  of 
them  are  insolvent.  Nearly  all  have  in 
merchandise  and  in  credits  a  sum  larger 
than  the  total  of  their  debts.  There  can 
be  no  advantage  in  selling  the  stock  on 
hand  for  silver  only  instead  of  for  good 
money,  nor  in  collecting  the  outstanding 
claims  in  the  inferior  metal.  Particularly 
sensitive  also  are  debtor  merchants  to 
monetary  derangements. 

Some  farmers  and  planters,  however, 
have  been  loud  in  their  demands  for  un- 
limited coinage  of  silver.  Possibly  it  is 


"  The  Debtor  Class."  105 

thought  that  the  difficulties  which  from 
time  immemorial  have  beset  the  paying  of 
interest  on  mortgages  and  the  making  of 
both  ends  to  meet,  would  be  lessened  if 
more  money  were  in  circulation,  and  that 
it  would  be  easy  to  pay  off  mortgages  if 
government  should  supply  a  plenty  of  sil- 
ver. But  excepting  the  proposition  to 
lend  directly  to  needy  land-owners,  a  prop- 
osition to  be  defeated  by  the  vote  of  every* 
body  else,  no  one  has  found  a  channel 
through  which  silver  can  be  made  to  flow 
from  the  national  treasury  into  the  pockets 
of  the  men  who  most  loudly  demand  it. 

Bankruptcy  laws  are  provided  for  the 
benefit  of  insolvent  debtors,  enabling  them 
to  make  new  starts  in  life.  Free  coinage  is 
advocated  for  the  benefit  of  debtors  gener- 
ally, but  where  is  there  a  solvent  debtor 
who  would  not  insist  that  he  should  be 
classed  among  creditors  or  among  property- 
owners,  rather  than  among  debtors  ?  A 
owns  a  farm  and  stock  worth  $15,000,  and 
mortgaged  for  $10,000  ;  B  has  a  business, 
the  balance-sheet  of  which,  on  one  side, 
shows  merchandise  on  hand  worth  $15,000, 


io6        Money,  Silver,  and  Finance. 

and  on  the  other,  debts  amounting  to 
$10,000;  C  has  credits  for  $15,000,  and 
debts  for  $10,000.  In  a  short  space  of 
time,  and  in  the  ordinary  course  of  events, 
each  one  of  these  individuals  may  so 
change  his  position  as  to  have  $5,000  in 
the  bank,  and  be  free  of  all  debt.  Before 
the  change  is  made,  will  you  insist  that  A 
belongs  to  "  the  debtor  class,"  and  that  B 
or  C  does  not  ?  Alter  the  figures  as  you 
like,  keeping  the  balance  on  the  right  side 
so  that  you  do  not  bring  in  the  insolvent 
debtors,  and  you  will  find  that  every 
debtor  is  more  properly  a  creditor  or  a 
property-owner  than  a  debtor.  Search 
where  you  will,  and  yet  you  cannot  find  a 
"Debtor  Class." 

Gold  bullion,  gold  money,  silver  money, 
and  paper  money,  are  each  of  them  worth 
about  thirty  per  cent.1  more  than  silver 
bullion  is  worth ;  but  it  is  not  proposed 
that  A,  B,  and  C  shall  be  permitted  to 
collect  in,  or  to  sell  for,  gold  bullion,  gold 
money,  silver  money,  and  paper  money, 
and  be  permitted  at  the  same  time  to  pay 
off  debts  in  -sv'/Wy  l>n]Uon.  If  sales  or  coL 

1  In  1896,  say  ninety  per  cent. 


"  The  Debtor  Class."  107 

lections  could  be  made  for  or  in  one  of  the 
four  more  valuable  things,  and  at  the  same 
time  debts  be  paid  off  with  the  less  valu- 
able thing,  then  debtors  would  be  benefited, 
excepting  that  most  debtors  would  be 
obliged  first  to  collect  in  the  less  valuable 
thing  in  order  to  obtain  the  means  of 
making  their  own  payments.  Carrying 
this  absurdity  a  little  farther,  and  referring 
to  the  A,  B,  and  C  already  introduced,  we 
may  see  that  a  law  which  should  permit 
the  payment  of  debts  in  silver  bullion 
might  possibly  enable  A  to  pay  off  $10,000 
of  debt  with  only  about  $7,700  of  real 
money ;  enable  B  to  do  as  well ;  but  compel 
C  to  lose  about  $1,150,  for  C,  instead  of 
having  a  balance  of  $5,000  in  money,  would 
have  a  balance  of  $5,000  in  silver  bullion, 
worth  only  $3,850.  Absurd  as  would  be 
a  proposition  to  benefit  some  debtors  in 
this  way,  it  becomes  more  ridiculous  if  you 
stop  to  consider  that  neither  A  nor  B  would 
be  likely  to  be  really  benefited,  for  each 
one,  in  order  to  obtain  the  means  for  pay- 
ing his  debts,  would  be  obliged  to  sell  his 
farm  or  his  merchandise  for  silver  bullioii, 


io8        Money,  Silver ',  and  Finance. 

for  if  people  could  pay  debts  with  silver 
bullion,  most  people  would  use  it  when 
buying  farms  or  merchandise.  A,  B,  and 
C,  of  course,  would  all  suffer  from  the 
financial  disturbance,  due  to  the  passage  of 
such  a  foolish  law. 

This  is  not  the  proposed  law,  but  the 
idea  is  to  benefit  debtors  by  making  silver 
bullion  worth  about  thirty  per  cent,  more 
than  it  is  now  worth,  or  by  bringing  the 
purchasing  power  of  money  down  to  the 
purchasing  power  of  silver  bullion,  or,  what 
is  the  same  thing,  advancing  prices  about 
thirty  per  cent.  It  is  claimed,  for  instance, 
that  A's  farm,  which  is  now  worth  $15,000, 
can  be  made  to  be  worth,  say  $19,000  to 
$20,000,  and  that  the  mortgage  of  $10,000 
will  then  represent  about  one  half  instead 
of,  as  at  present,  two  thirds  of  the  value 
of  the  farm.  B,  it  is  claimed,  would  be 
able  to  sell  his  merchandise  for  $19,000  to 
$20,000,  instead  of  for  $15,000,  and  be  able 
to  realize  a  balance  of  $9,000  to  $10,000, 
instead  of  $5,000.  C,  being  so  unfortunate 
as  to  have  all  his  assets  in  credits,  would 
be  obliged  to  lose  something  like  $1,150 


"  The  Debtor  Class"  109 

in   the  purchasing  power   of    his   $5,000 
balance. 

B  is  the  merchant  or  store-keeper,  and  if 
free  coinage  should  advance  prices  he  would 
obtain  more  for  his  stock  of  goods,  but  the 
money  which  he  would  accumulate  would 
be  worth  less  than  money  is  now  worth. 
In  all  probability,  however,  the  financial 
disturbance  would  interfere  with  the  free 
selling  of  merchandise.  Banks  would  not 
so  willingly  lend  money,  because  of  the 
necessity  to  take  depreciated,  or  further 
depreciated  money,  in  settlement  of  loans, 
and  if  we  reflect  upon  the  enormous  power 
of  banking  facilities  in  the  making  of 
prices,  we  shall  see  that  our  merchants  and 
store-keepers  are  not  in  the  way  to  be 
benefited  by  any  cheapening  of  money,  and 
this  is  true,  whether  our  friend  B  or  our 
friend  C  be  considered  typical  "  debtors." 
And  certainly  any  benefit  derived  by  either 
A  or  B  would  disappear  if  he  should  be  in 
a  similar  situation  when  the  United  States 
should  endeavor  to  return  to  the  gold  basis. 
Any  good  results  possible  to  A  or  B  from 
reducing  the  value  of  money  would  be 


no        Money,  Silver,  and  Finance. 

matched  by  bad  results  to  the  A  or  B  of 
the  future,  for  the  United  States  would  as 
surely  try  to  get  back  to  the  gold  basis,  as 
it  did  try  to  get  back  to  that  basis  from 
the  paper  basis  of  1862-1879. 

Farmer  A  is  the  only  "  debtor  "  who  is 
at  all  likely  to  be  benefited  by  money- 
cheapening,  and  even  he  is  not  likely  to  be 
benefited  unless  his  mortgage  have  some 
years  to  run.  Promptness  in  the  monetary 
change  and  avoidance  of  financial  disturb- 
ance are  requisite  to  enable  most  debtors 
to  reap  any  benefit,  but  farmer  A  could 
hope  that  during  the  years  which  his  mort- 
gage has  to  run,  the  country  would  over- 
come the  financial  shock ;  and  that  his 
farm  would  be  salable  for  $19,000  or 
$20,000,  when  his  mortgage  of  $10,000 
should  fall  due.  If  it  should  become  clear 
before  the  mortgage  falls  due,  that  we  are 
drifting  upon  a  silver  basis,  then  in  re- 
newing the  mortgage  farmer  A  would  be 
obliged  to  agree  to  a  "gold  clause  "  in  the 
contract,  forcing  him  to  pay  gold  or  its 
equivalent  in  settlement  of  the  mortgage. 
"When  we  shall  arrive  at  the  time  for  the 


"  The  Debtor  Class."  1 1 1 

enacting  of  a  free-coinage  law,  the  number 
of  farmer  A7s  that  could  possibly  reap  a 
benefit  from  the  law  will  be  very  small. 
Mortgagees  may  be  trusted  to  take  care 
of  themselves,  if  given  a  reasonable  time 
to  do  so. 

Failure  to  notice  that  most  debtors  can  as 
properly  be  classed  with  creditors,  has  led 
nations  into  adopting  measures  for  the 
benefit  of  the  former  at  the  expense  of  the 
latter.  Trade  has  been  checked,  borrowers 
have  been  prevented  from  obtaining  new 
loans,  and  the  uniform  result  of  such  un- 
wise measures  has  been  injury  to  nearly 
everybody.  And  to-day,  in  so  far  as  the 
danger  of  our  slipping  off  the  gold  basis  is 
thought  to  be  real,  both  European  and 
American  capitalists  are  avoiding  long- 
time American  loans  or  are  insisting  upon 
the  "gold-clause"  in  long-time  contracts. 
The  industries  of  the  country  have  already 
suffered  enormously,  because  investors  fear 
financial  disturbance  and  because  money- 
lenders and  capitalists  do  not  feel  sure  that 
borrowers  will  be  able  to  return  as  good 
money  as  they  wish  to  borrow ;  and,  I 


ii2        Money,  Silver,  and  Finance. 

have  no  doubt  that  farmer  A's  farm  is 
worth,  to-day,  somewhat  less  than  it  would 
be  worth  if  farm-buyers  were  fully  assured 
that  the  valuable  kind  of  money,  which 
must  now  be  used  in  purchasing  a  farm, 
could  be  obtained,  when  selling  a  farm, 
some  years  hence. 

Undoubtedly  there  are  individuals  who 
stand  ready  to  profit  by  the  unlimited  issue 
of  silver  money,  or  paper  money,  but  of 
these  individuals  few  are  debtors  and  the 
total  number  is  small.  The  mass  of  the 
people  are  always  in  position  to  be  injured 
by  any  governmental  folly,  and  have  al- 
ready been  greatly  injured  by  the  mere 
talk  or  prospect  of  free  coinage. 

I  do  not  consider  it  necessary  to  say 
that  only  dishonest  people  would  favor  the 
benefiting  of  debtors  at  the  expense  of 
creditors.  Those  people  may  have  never 
considered  the  real  composition  of  the  so- 
called  "  debtor  class,"  and  may  never  think 
of  debtors  excepting  as  down-trodden  indi- 
viduals, although  naturally  debtors  must 
be,  as  a  rule,  persons  who  are  so  fortunate 
so  to  possess  standing  or  credit  in  the  com- 


"  The  Debtor  Class!'  113 

munity.  Then  there  are  people  who  be- 
lieve that  u  demonetization  "  took  place ; 
that  the  government  thereby  put  prices 
down ;  that  the  fall  in  prices  was  more 
harmful  than  beneficial ;  and  therefore 
that  the  government  is  able  and  ought  to 
put  prices  up  again.  Lack  of  familiarity 
with  the  facts  and  with  the  actual  work- 
ings and  actual  conditions  of  trade  and 
finance  does  not  imply  lack  of  honesty. 

Governmental  action  to  advance  prices— 
that  is,  to  reduce  the  value  of  money — is 

unfair  to  all  creditors  who  are  not  debtors, 

* 

or  are  not  to  so  great  an  amount.  Wage- 
earners,  salary-earners,  pensioners,  savings- 
bank  depositors,  the  beneficiaries  of  life- 
insurance  companies,  and  nearly  all  persons 
who  receive  fixed  sums,  or  who  are  to  re- 
ceive money,  the  sum  of  which  is  already 
named,  would  be  injured  by  an  advance  in 
the  prices  of  commodities  for  the  purchase 
of  which  that  money  must  be  used. 

8 

1896.  During  the  past  three  years,  unhappily,  debtors  and  would- 
be  borrowers  have  felt  the  evils  of  financial  disturbance,  and  the 
very  reverse  of  amelioration,  coming  from  free-coinage  talk.  Debt- 
paying  and  debt-rearranging  are  always  with  us.  Debt-scaling 
opportunity,  through  free-coinage  of  silver,  is  the  dream  of  the  poli- 
tician, unrealizable  at  present,  probably  unrealizable  in  time  for 
present  debtors. 


CHAPTER  VII. 

"  THE    BALANCE    OF     TRADE." FOREIGN 

EXCHANGE. 

TRADE  is  said  to  be  "  favorable  "  wlien 
the  country's  exports  of  merchandise  ex- 
ceed the  imports.  Trade  is  said  to  be 
"unfavorable"  when  the^ country's  imports 
of  merchandise  exceed  the  exports.  In 
the  former  case  the  balance  of  trade,  so- 
called,  is  "  favorable,"  and  in  the  latter 
"  unfavorable  "  ;  and  so  strongly  is  specula- 
tion affected  either  way  by  the  knowledge 
of  a  "  favorable  "  or  "  unfavorable  "  bal- 
ance, that  the  market  value  of  stocks  of  ten 
moves  in  obedience  to  this  knowledge,  so 
far  that  millions  and  millions  of  dollars  are 
transferred  from  some  pockets  to  others. 
We  shall  see,  however,  that  this  great 
power  of  "  the  balance  of  trade  "  is  unwar 
ranted, — is  due,  in  fact,  to  a  misunderstand- 
ing of  the  subject.  It  appears  to  be  com- 
114 


"  The  Balance  of  Trade"          115 

monly  supposed  that  a  favorable  balance 
of  trade  must  be  offset  by  importations  of 
gold,  and  that  for  an  unfavorable  balance 
we  must  necessarily  send  gold  out  of  the 
country.  But  the  gold-movement  itself, 
whether  governed  by  trade  conditions  or 
not,  generally  attracts  more  attention  than 
it  deserves  ;  at  least  so  the  writer  hopes  to 
prove. 

The  par  of  exchange *  between  America 
and  England,  therefore  between  America 
and  the  world,  because  of  the  world's  cus- 
tom of  settling  in  London  accounts  be- 
tween the  traders  of  different  countries,  is 
4.867,  which  means  that  «£!  sterling  is 
equivalent  to  $4.867  in  gold  ;  and  when- 
ever the  market  rate  of  exchange  is  at  or 
close  to  this  figure,  no  important  quantity 
of  gold  can  move  between  England  and 
America  either  way,  for  the  simple  reason 
that  it  costs  something  to  move  the  metal, 
say  for  freight,  insurance,  and  to  cover  the 

1  The  reader  who  would  like  to  acquaint  himself  fully  with 
the  theory  and  practice  of  foreign  exchanges  should  obtain 
The  TJicorv  of  the  Foreign  Exchanges,  by  the  Right  Hon. 
George  J.  Goschen,  M.P.,  although  the  book  was  written  be« 
fore  the  present  par  of  exchange  was  established. 


1 1 6        Money,  Silver,  and  Finance. 

loss  of  interest  while  the  gold  is  on  the 
ocean.  At  this  moment  there  are  weekly 
arrivals  of  gold  from  Europe,  and  the  mar- 
ket quotation  for  sterling  exchange  is 
about  one  per  cent,  below  par.  Perhaps  a 
clipping  from  a  daily  paper 1  will  serve  to 
explain  the  situation  : 

"  The  par  of  sterling  exchange  is  4.867. 
The  rate  of  demand  sterling  bills  at  which 
gold  can  be  exported  to  London  without 
loss  is  4.88^  for  bars,  and  4.89J  for  coin, 
and  the  rate  at  which  it  can  be  imported 
without  loss  is  4.83f. 

"  The  market  for  sterling  was  firmer  in 
tone  in  the  forenoon,  and  60  day  rate  ad- 
vanced \  cent  at  12:11  P.M.  Posted  rates 
now  4.80-jl-  and  4.84.  The  rates  for  actual 
business  were  as  follows,  viz. :  Sixty  days, 
4.79| ;  demand,  4.83J- ;  cables,  4.83f  to  4.84. 
Commercial  bills  were  4.78 \  to  4.78|.  The 
supply  of  cotton  bills  was  fair." 

Let  us  go  over  this  in  detail,  considering 
the  balance  of  trade  when  "favorable." 
The  New  York  bankers  whose  business  it 
is  to  carry  on  the  financial  part  of  foreign 

1  The  New  York  Evening  Post,  October  13,  1891. 


"  Tfre  Balance  of  Trade!'          \  17 

trade  have  such  a  strong  desire  for  gold 
that  for  every  pound  sterling  deliverable 
by  their  correspondents  in  London,  on 
cable  order,  they  are  willing  to  accept, 
here,  $4.83f  to  $4.84;  for  every  pound 
sterling  deliverable  there,  on  demand,  they 
would  accept,  here,  $4.83^;  and  for  every 
one  deliverable  there,  after  the  lapse  of 
sixty  days,  these  bankers  would  accept, 
here  and  now,  $4.79-|,  the  bankers  making 
interest  in  the  meantime.  Or  we  may  say 
that  the  London  correspondents  of  the 
New  York  bankers  feel  an  unusually  lieavy 
demand  for  London  bills  of  exchange 
drawn  against  New  York,  and  have  in- 
structed the  New  York  bankers  to  provide 
themselves  with  the  money  necessary  to 
meet  these  bills.  In  the  same  newspaper 
paragraph  we  learn  that  there  was  a  fair 
supply  of  cotton  bills  (a  portion  of  the 
mass  of  commercial  bills)  and  that  com- 
mercial bills  were  worth  only  $4.78^  to 
$4.78|  for  each  £\  sterling,  which  means 
that  whoever,  in  America,  at  that  moment, 
was  in  the  act  of  making  a  sale  of  cotton, 
wheat,  petroleum,  or  other  product,  to  a 


i  iS        Money,  Silver  y  and  Finance. 

buyer  in  any  foreign  country,  would  have 
to  lose  the  difference  between  $4.78|  and 
$4.867  upon  each  <£!  sterling,  the  banker's 
profit  included,  less  the  interest  from  the 
date  of  selling  his  bill  of  exchange  to  the 
date  of  maturity  of  the  bill.  This  is  the 
state  of  affairs  when  it  is  said  that  the 
balance  of  trade  is  "  favorable."  In  reality, 
when  gold  comes  this  way  under  these  favor- 
able conditions,  the  cost  of  bringing  it  must 
be  borne,  largely,  by  our  exporters  of  mer- 
chandise, for  when  they  ship  goods  they 
draw  commercial  bills  of  exchange  against 
the  foreign  receivers  of  those  goods  and 
these  bills  of  exchange  must  be  sold  to 
bankers  who  are  already  heavily  loaded 
with  similar  bills  of  exchange. 

If,  when  the  balance  of  trade  is  "  favor- 
able," you  should  go  to  a  banker  and  ask 
him  for  money  to  cover  the  value  of  mer- 
chandise which  you  were  then  exporting, 
he  could  rightly  say ;  "  So  many  exporters 
want  to  obtain  money,  just  now,  that  I 
cannot  supply  them  without  fetching  the 
money  from  England,  and  each  exporter 
must  pay  his  share  of  the  necessary  expense. 


"  The  Balance  of  Trade."          1 19 

Your  commercial  bill  of  exchange  must  be 
cashed  in  London,  at  maturity,  and  the 
money  must  be  shipped  to  New  York,  for 
that  is  the  way  at  present  to  reimburse 
me."  When,  therefore,  the  balance  of 
trade  is  "  favorable "  to  this  country  our 
exporters,  finding  it  difficult  or  expensive 
to  obtain  cash  for  their  bills  of  exchange, 
contract  their  buying  of  exportable  mer- 
chandise and  force  down  the  price  of  it, 
thus  passing  along  to  the  farmer  and  the 
manufacturer  a  portion  of  the  burden  of 
expense  entailed  by  the  fetching  of  gold 
from  Europe  to  America.  Even  if  in  ad- 
justing the  prices  of  goods  to  the  point 
where  exportation  is  possible,  the  expense 
of  transporting  gold  be  fastened  partly 
upon  the  foreign  buyers  of  the  merchan- 
dise, still  this  expense  is  a  tax  upon  our 
export  business. 

In  regard,  now,  to  our  import  business 
when  the  balance  of  trade  is  "favorable." 
At  such  a  time  European  bankers  will  pay 
high  rates  for  commercial  bills  of  exchange 
drawn  against  New  York,  for  by  buying 
these  bills  and  sending  them  to  the  bank- 


1 20        Money,  Silver,  and  Finance. 

ers'  New  York  correspondents  these  latter 
will  be  put  in  position  to  obtain  here  the 
money  which  we  have  seen  to  be  in  so 
great  demand.  Shippers  of  goods  to 
America  will  find  that,  in  addition  to 
receiving  the  agreed-upon  price  for  their 
goods,  they  possibly  may  receive  a  premium 
upon  the  bill  of  exchange  drawn  against 
the  consignees  of  those  goods,  or,  at  least, 
receive  the  par  value  of  their  bills.  When 
trade  is  "  favorable "  to  this  country,  for- 
eign shippers  to  America  will  be  encour- 
aged by  this  advantage,  and  may  lower 
their  prices  to  American  buyers  to  induce 
them  to  buy  more  largely. 

We  thus  see  that  when  the  balance  of 
trade  is  u favorable"  there' are  forces  at 
work  which  both  check  the  exportation  of 
merchandise  and  encourage  the  importa- 
tion of  merchandise;  and,  on  the  other 
hand,  we  might  as  easily  show  that  when- 
ever the  balance  of  trade  is  "unfavorable" 
there  must  be  forces  at  work  which  check 
the  importation  of  merchandise  and  en- 
courage the  exportation  of  merchandise. 
There  are  forces  always  at  work  which, 


"  The  Balance  of  Trade."  121 

sooner  or  later,  bring  about  an  equilibrium, 
only,  however,  to  be  overturned  in  due 
course,  the  processes  of  change  going  on 
indefinitely.  When  gold  comes  to  us,  or 
goes  from  us,  we  can  hardly  say  that  trade 
is  "  favorable"  or  "  unfavorable,"  but, 
rather  that  trade  has  been  favorable  or 
unfavorable,  and  that  powerful  influences 
are  at  work  in  re-establishing  the  equilib- 
rium. 

But  we  may  use  the  proper  tense  and 
still  be  far  from  understanding  the  broad 
subject  of  foreign  exchange.  The  bal- 
ance of  trade  is  only  one  of  many  factors, 
for  our  exports  of  merchandise  may  exceed 
our  imports  of  merchandise  during  a  long 
period  and  yet  no  gold  be  sent  to  us. 
Evidently  other  things  come  into  the  cal- 
culation, and  first  let  us  note  that  it  is  not 
the  balance  of  trade  which  should  attract 
attention,  but  the  balance  of  indebtedness. 
Europe  can  contract  debt's  to  America  by 
the  purchase  of  stocks,  bonds,  or  other 
securities  as  readily  as  by  the  purchase  of 
wheat,  cotton,  or  petroleum,  the  rate  of 
foreign  exchange  being  similarly  affected, 


122        Money,  Silver,  and  Finance. 

no  matter  what  Europe  buys.  Conversely, 
European  owners  of  American  securities 
when  sending  them  to  America  obtain  the 
right  to  draw  against  the  American  receivers 
of  those  securities.  By  the  mediation  of 
the  bankers,  one  hundred  shares  of  stock, 
worth  $10,000,  sent  by  a  London  firm  to  a 
New  York  firm,  will  make  as  much  ex- 
change against  New  York  as  ten  thousand 

o        o 

bushels  of  wheat,  worth  $10,000,  shipped 
by  a  New  York  firm  to  a  Liverpool  firm, 
will  make  against  London  for  Liverpool 
account.  If  the  wheat  and  the  stock 
transactions  take  place  at  the  same  time,' 
and  are  represented  by  bills  of  exchange, 
maturing  at  the  same  time,  one  must  offset 
the  other;  and  it  follows  that  a  country's 
exports  of  merchandise  may  exceed  its 
imports  of  merchandise,  its  balance  of 
trade  being  called  "  favorable,"  and  yet  no 
balance  of  indebtedness  appear,  indebted- 
ness for  merchandise  possibly  balancing 
indebtedness  for  both  stocks  and  merchan- 
dise. Important  distinctions  between  secu- 
rities and  merchandise  should  be  noted, 
however.  As  a  rule,  any  kind  of  mer- 


"  The  Balance  of  Traded  123 

chandise  moves  either  to  or  from  America, 
no  kind,  generally  speaking,  moving  both 
ways;  we  exporting  wheat,  for  instance, 
never  importing  it,  and  importing  coffee, 
not  exporting  it;  while,  on  the  contrary, 
an  identical  bond  or  certificate  of  stock 
may  cross  the  ocean  many  times.  Then, 
the  movement  of  merchandise  is  recorded, 
while  the  movement  of  securities  is  not 
recorded.  Here  is  a  tremendous  force, 
this  movement  of  securities,  always  at 
work  but  never  measurable,  sometimes 
offsetting  the  balance  of  trade  and  some- 
times running  with  it,  sometimes  prevent- 
ing importations  or  exportations  of  gold, 
and  sometimes  making  necessary  a  larger 
volume  of  importation  or  exportation  of 
the  metal.  Indeed,  the  activity  of  arbi- 
trage brokers,  buying  and  selling  in  the 
London  and  New  York  stock  markets  at 
the  same  moment,  gives  a  mastering  energy 
to  this  force.  The  close  connection  between 
gold  movements  and  security  movements 
may  be  more  clear  if  we  bear  in  mind  that 
when  a  London  banker  wishes  to  pay  gold 
to  a  New  York  banker  he  can  order  the 


1 24        Money,  Silver,  and  Finance. 

latter  to  sell  stock  in  New  York,  and  bor- 
row the  stock  for  delivery  there  in  order 
to  bridge  over  the  time  taken  by  the  Lon- 
don stock  to  reach  New  York. 

Speaking  now  of  a  balance  of  indebted 
ness  instead  of  a  balance  of  trade,  the 
indebtedness  arising  both  from  trade  move- 
ments and  security  movements,  a  further 
complication  shows  itself :  given  the  fact 
of  indebtedness,  the  influx  or  efflux  of  gold 
will  depend  upon  the  -character  of  that  in- 
debtedness, exactly  as  in  every  debtor's 
case  the  note  which  is  due  must  be  pro- 
vided for,  while  the  note  which  has  some 
months  to  run  may  be  put  out  of  mind, 
the  former  requiring  the  use  of  ready 
money,  the  latter  requiring  only  that  busi- 
ness shall  run  along  in  the  usual  manner; 
or  as  a  demand  note  must  be  provided  for 
when  payment  is  wanted,  not  when  pay- 
ment is  not  wanted.  And  between  nations, 
as  between  individuals,  the  question  of 
wanting  or  not  wanting  payment  is  deter- 
mined by  the  rate  of  interest  and  the 
estimate  placed  upon  the  value  of  the 
security,  and  also  upon  the  creditor's  own 


* «  The  Balance  of  Trade. "  125 

financial  position.  As  a  matter  of  fact,  we 
should  remark  here  that  because  of  the 
comparative  newness  of  our  country  and 
the  enterprising  spirit  of  our  people,  we 
are  a  debtor  as  distinguished  from  a  cred- 
itor nation,  and  corresponding  with  the 
usually  high  rate  of  interest  prevailing  in 
America,  as  judged  by  European  standards, 
is  the  circumstance  that  this  country  is  a 
great  producer  of  securities.  Those  stocks 
and  bonds  which  cross  and  recross  the  ocean 
are  always  American  stocks  and  bonds, 
nobody  here  wanting  any  other.  The  sum 
total  of  them  in  European  hands  is  un- 
known, but  it  probably  exceeds  our  national 
debt. 

The  rate  of  foreign  exchange,  affected 
by  trade  movements  and  by  the  movements 
of  securities,  is  also  affected  by  interest 
and  dividend  payments  and  by  remittances 
for  freight  on  importations  of  merchan- 
dise, the  owners  of  vessels  usually  being 
foreigners.  Interest,  dividend,  and  freight 
remittances  make  exchange  as  readily  as 
movements  of  securities  or  merchandise 
make  exchange.  But  for  the  necessity  to 


126        Money,  Silver,  and  Finance. 

continually  buy  bankers'  bills  of  exchange 
against  London,  in  order  to  pay,  there, 
interest,  dividend,  and  freight  money,  the 
rate  of  exchange  would  oftener  fall  to 
the  gold-importing  point,  or  would  be  more 
generally  below  the  gold-exporting  point, 
unless  this  effect  were  counteracted.  It 
seems  best  to  put  in  this  proviso  as  a 
tribute  to  the  vastness  and  complexity  of 
the  subject. 

American  securities  owned  abroad  are 
of  various  kinds — bonds  principal  and 
interest  payable  in  gold  or  payable  -  in 
currency;  bonds  of  defunct  companies 
and  bankrupt  States,  principal  and  interest 
doubtful  or  worse ;  income  bonds,  the 
principal  payable  in  gold  or  payable  in 
currency,  the  payment  of  interest  doubt- 
ful;  stocks  of  railroads,  of  other  trans- 
portation companies,  and  of  many  industrial 
corporations,  dividends  doubtful  or  not,  as 
each  case  may  be,  but  the  principal  not 
payable  at  all,  at  least  not  by  the  issuer  of 
such  stocks.  A  bond  is  evidence  of  debt, 
specifying  the  interest,  stating  when  the 
principal  shall  be  paid,  and  naming  either 


'"  The  Balance  of  Trade"  127 

gold  or  legal  money ;  a  certificate  of  stock 
is  evidence  that  the  owner  is  a  part-owner 
in  the  corporation,  not  a  creditor  of  the 
corporation ;  and,  having  no  right  to  regain 
his  money  except  by  sale  of  the  stock,  or 
the  winding  up  of  the  corporation,  such 
owner  of  stock,  whether  living  in  America 
or  in  Europe,  necessarily  takes  the  chance 
of  finally  receiving  gold  or  currency,  or 
more  or  less  of  either.  Important  to  each 
party  interested,  as  is  the  difference  be- 
tween bonds  and  stocks,  the  distinction  is 
unimportant  from  our  present  point  of  view, 
so  long  as  we  consider  the  bonds  and  stocks 
which  have  a  quotable  value  on  both  sides 
of  the  ocean.  A  corporation  may  pay  no 
attention  to  its  bonds  which  are  to  fall  due 
twenty  years  hence,  and  may  care  not  at 
all  whether  its  stock  sells  on  the  market  at 
a  high  price  or  a  low  price,  and  the  officers 
of  such  corporation  may  not  even  know 
whether  most  of  the  bondholders  and 
stockholders  are  Americans  or  Europeans ; 
but  every  sale  in  London  for  American 
account,  and  every  sale  in  New  York  for 
European  account,  affects  directly  the  rate 


128        Money,  Silver^  and  Finance. 

of  foreign  exchange  between  New  York 
and  the  rest  of  the  world. 

Foreign  exchange  is  affected  too  by  the 
difference  which  exists,  at  any  time,  be- 
tween the  American  and  the  European  mar- 
ket rate  of  interest.  If  money  can  be  loaned 
at  ten  per  cent,  in  New  York  while  only 
four  per  cent,  can  be  obtained  in  London, 
there  is  an  advantage  in  keeping  money 
here,  and  London  owners  of  loanable  funds 
will  instruct  their  New  York  correspond- 
ents to  that  effect ;  and,  at  such  difference 
in  rate,  if  continuing  long  enough,  it  would 
be  well  for  London  owners  of  loanable 
funds  to  send  them  to  New  York,  the  bene- 
fit of  high  interest  more  than  offsetting 
the  expense  of  transportation. 

The  fact  of  ours  being  a  gold-producing 
country  is  quite  important,  for  it  indicates 
that  a  small  annual  exportation  of  gold 
should  be  expected. 

The  American  habit  of  travelling  abroad 
also  has  to  do  with  the  rate  of  exchange, 
many  more  Americans  travelling  there,  than 
foreigners  travelling  here,  and  the  means 
of  supporting  these  Americans  being 


•  "  The  Balance  of  Trade"  1 29 

drawn  from  here.  Those  of  our  country- 
men who  live  abroad  and  draw  their  living 
from  America,  we  may  class  with  the  great 
i uii nber  of  Europeans  who  own  American 
securities. 

We  have  now  considered  the  factors 
in  foreign  exchange,  but  only  under 
normal  conditions  and  not  in  an  exhaus- 
tive manner.  Taking  a  limited  view,  we 
may  say  that  whenever  the  market  rate  of 
demand,  or  cable,  sterling  bills  (bankers') 
is  much  above  4.867,  there  is  evidence  of  the 
existence  of  one  or  more  of  the  following 
circumstances  ;  foreign  goods  have  been 
imported  too  freely,  American  goods  are 
not  wanted  abroad,  American  securities 
find  a  better  market  here  than  in  Europe, 
our  rate  of  interest  is  too  low  to  attract 
or  keep  foreign  money,  foreigners  are  short 
of  money,  much  money  is  wanted  abroad 
by  American  travellers,  we  have  produced 
a  surplus  of  gold,  freight  remittances  are 
large,  or  interest  and  dividend  payments 
on  securities  owned  abroad  are  unusually 
heavy.  And  we  may  say  that  whenever 
the  market  rate  of  demand  sterling  bills  is 


130        Money,  Silver,  and  Finance. 

below  4.867,  the  reverse  is  true.  Conse- 
quently when  the  rate  has  advanced  to 
4.88J,  or  has  fallen  to  4.8'3f,  the  forces 
named  must  have  been  acting  together  in 
one  or  the  other  direction,  or  one  or  more 
of  the  forces  must  have  been  acting  with 
overmastering  energy.  But  whatever  the 
force,  or  however  great  its  energy,  the  op- 
posing force  always  stops  it,  sooner  or  later, 
and  the  expense  of  moving  gold  across  the 
ocean  generally  operates  as  a  check  upon 
the  too  powerful  force.  Ordinarily  gold 
importations  or  gold  exportations  mean 
little  more  than  that  a  tax  has  been  laid 
upon  those  individuals  who  persist  in  do- 
ing business  in  one  direction,  after  too 
much  business  has  already  been  done  in 
that  direction.  Almost  every  transatlantic 
shipment  of  gold  indicates  a  derangement 
of  our  foreign  business,  but  so  nearly  in- 
variably of  a  temporary  nature  that  the 
general  public  need  pay  little  attention  to 
it.  As  a  matter  of  fact,  I  believe  that 
since  the  resumption  of  specie  payments  in 
1879,  this  country  has  neither  gained  nor 
lost,  as  the  net  result  of  importation  and 


"  •  The  Balance  of  Trade. "  131 

exportation,  in  any  year,  a  sum  of  gold 
great  enough  to  warrant  half  the  variation 
in  speculative  prices  which  has  been  sup- 
posed to  have  resulted  from  such  gain  or 
loss  of  the  metal.  I  am  referring  only  to 
actual  gain  or  loss  .of  gold  not  to,  for  in- 
stance, a  downward  movement  in  prices 
when  brought  about  by  fear  that  great 
quantities  of  gold  will  be  exported  to  pay 
for  American  securities,  this  fear  being 
based  upon  a  belief  that  foreigners  want 
to  get  rid  of  such  securities. 

NOTK  TO  THIRD  EDITION.— When  the  currency  became  positively 
redundant  after  the  crisis  of  1S93,  the  exportations  of  gold  quite 
properlv  caused  great  fear  of  results,  for  a  premium  on  gold  was 
actually  in  sight.  It  seemed  possible  that  gold  money  would  become 
merchandise. 


CHAPTER  VIII. 

FOREIGN  EXCHANGE   UNDER   NORMAL   AND 
UNDER  ABNORMAL  CONDITIONS. 

THIS  country  does  much  of  its  business 
upon  borrowed  capital,  but  unfortunate  as 
is  the  situation,  it  is  not  nearly  so  bad  as 
would  be  the  situation  if  we  were  unable 
to  borrow  or  if  our  power  of  borrowing 
were  curtailed.  The  merchant  who,  from 
large  profits,  pays  a  small  portion  for  in- 
terest may  well  look  upon  his  good  credit 
as  a  very  good  thing ;  and  Americans  who 
bewail  the  sending  of  interest  and  dividend 
moneys  to  foreigners  should  console  them- 
selves with  the  thought  that  these  pay- 
ments are  only  a  small  portion  of  the  total 
earnings  on  the  capital  which  has  been 
invested  by  foreigners  in  America.  No- 
body has  any  right  to  object  to  the  benefit 
derived  by  us  from  our  high  credit  abroad. 
When  an  American  security  is  taken  by  a 
132 


Foreign  Exchange.  133 

foreigner,  the  fact  indicates  that  American 
capital  can  be  employed  to  better  advan- 
tage, and  the  fact  of  there  being  held 
abroad  an  enormous  mass  of  American 
securities,  indicates  the  release  of  an  enor- 
mous sum  of  American  capital  for  more 
profitable  uses.  Eastern  capital  is  exten- 
sively used  in  the  Western  and  Southern 
States,  both  because  it  cannot  be  so  profit- 
ably used  at  home,  and  because  the  West- 
erners and  Southerners  can  make  a  profit 
by  its  use  in  excess  of  the  interest  and 
dividends  sent  to  Eastern  capitalists. 
European  capital  is  extensively  used  in  the 
United  States,  both  because  it  cannot  be  so 
profitably  used  at  home,  and  because  the 
people  of  the  United  States  can  make  a 
profit  by  its  use  in  excess  of  the  interest 
and  dividends  sent  to  European  capi- 
talists. 

Turning  now  to  our  lack  of  ownership 
in  the  steamers  and  sailing-vessels  engaged 
in  foreign  trade,  we  may  say  that  under 
existing  laws  and  circumstances  American 
capital  is  better  employed.  Without  ad- 
mitting that  our  merchant  marine  could 


134        Money,  Silver,  and  Finance. 

not  be  restored,  we  may  class  freight  money 
with,  interest  and  dividend  money — all  evi- 
dences that  this  country  has  not  yet  accu- 
mulated sufficient  capital  for  all  its  business 
wants. 

The  newness  of  America,  her  immense 
resources,  and  the  honesty,  inventive  gen- 
ius, and  enterprising  character  of  the 
people  have  drawn  hither  foreign  capital; 
and  should  continue  to  draw  it.  Therefore 
we  may  class  as  a  normal  factor  in  foreign 
exchange  the  flow  of  foreign  capital  this 
way  for  investment ;  and,  consequently,  we 
may  also  class  among  the  normal  factors  in 
foreign  exchange  the  flow  toward  Europe 
of  interest  and  dividend  -disbursements, 
leaving  questionable  the  classification  of 
freight  remittances,  but  bearing  in  mind 
that  such  remittances  are  continually  being 
made.  Intimately  connected,  we  may  note 
here,  are  capital  and  its  earnings,  and  there 
can  be  no  doubt  that  the  greater  the  inter- 
est and  dividend  payments  to  foreigners 
the  larger  will  be  the  total  of  foreign  capi- 
tal invested  ;  and,  naturally,  the  greater 
the  earnings  of  vessels  engaged  in  Ameri- 


Foreign  Exchange.  135 

can  foreign  trade,  the  larger  will  be  the  sum 
of  such  investments. 

Looking  upon  the  purchasing  of  Ameri- 
can securities  by  foreigners  as  the  natural 
condition  of  our  present  attainment  in 
growth,  so  to  speak,  we  may  consider  the 
selling  of  American  securities  by  foreigners 
to  Americans  as  quite  abnormal.  The 
home-coming  of  our  stocks  and  bonds 
should  resemble  an  eddy  in  a  stream,  and 
should  not  resemble  the  stream  itself. 
When  those  stocks  and  bonds  move  this 
way  in  large  volume,  something,  certainly, 
is  the  matter  ;  and,  of  course,  several  forces 
may  have  worked  together  to  reverse  the 
natural  movement  of  the  stream.  We  may 
do  well  to  note  some  of  these  forces.  The 
expectation  of  the  failure  of  a  great  house, 
and  the  actual  failure  of  the  Barings  in 
London,  in  1890,  by  creating  a  very  great 
demand  for  money,  induced  many  sales  of 
American  securities  to  Americans,  and 
these  sales  were  like  a  creditor's  demands 
for  money.  But  a  flow  of  American  secu- 
rities this  way,  brought  about  by  a  short- 
age of  money  in  London,  should  be  dis- 


136        Money,  Silver,  and  Finance. 

tinguished  from  a  similar  flow  of  American 
securities  when  it  is  caused,  not  by  any 
trouble  among  our  creditors,  but  by  their 
fear  that  we  intend  to  commit  an  act  detri- 
mental to  their  interests.  In  1890  and  in 
1891  many  sales  of  securities  for  shipment 
to  America  were  made  because  the  owners 
needed  money,  and  many,  doubtless,  were 
made  because  the  owners  expected  that 
pro-silver  legislation  here  would  be  "  dis- 
counted "  by  a  fall  in  our  stock  market 
and  by  a  decline  in  the  activity  of  most  of 
our  industries.  In  European  eyes,  free 
silver  coinage  would  be  supreme  folly ; 
therefore  the  wisdom  of  selling  American 
securities  long  before  such  an  act  could  be 
passed, — in  common  parlance,  the  wisdom 
of  "  discounting  "  the  future.  And  at  the 
same  time  that  foreign  holders  of  American 
securities  are  frightened  into  selling,  would- 
be  foreign  investors  in  American  securities 
are  deterred  from  buying,  for  if  a  European 
wish  to  sell  stock  now  because  he  can 
obtain  $10,000  in  gold,  and  because  he 
thinks  he  may  be  able  to  obtain  in  tile 
future  only  $10,000  in  silver,  gold  money 


Foreign  Exchange.  137 

then  to  be  worth  thirty  per  cent,  more 
than  silver  money ;'  so,  in  the  same  manner, 
a  would-be  investor  in  American  stock 
could  reason  that  by  holding  $10,000  in 
gold  until  the  American  gold  money  shall 
be  worth  thirty  per  cent,  more  than  the 
American  silver  money,  lie  will  be  able 
first  to  give  $10,000  in  gold  for '$13,000  in 
silver,  then  use  $10,000  of  the  silver  in 
purchasing  the  stock,  and  be  able  to  retain 
$3,000  as  a  profit  for  waiting.  In  the  first 
half  of  the  year  1891  we  exported  about 
$73,000,000  in  gold,  coin  and  bars,  and  in 
the  second  half  of  the  same  year  we  im- 
ported only  about  $38,000,000,  in  spite  of 
the  fact  that  in  the  second  half  of  the  year 
the  natural  return  movement  was  assisted 
by  a  phenomenal  circumstance,  viz. :  crops 
were  very  short  abroad  and  were  very 
abundant  here.  The  general  expectation 
in  the  summer  of  1891  that  most  of  the 
$73,000,000  would  come  back,  was  disap- 
pointed, I  believe,  because  European  own- 
ers of  American  secimties  and  European 
would-be  investors  had  imbibed  a  fear  of 
American  pro-silver  legislation.  Lack  of 

1  Say  ninety  per  cent,  in  1896. 


138        Money,  Silver p,  and  Finance. 

accurate  knowledge  in  Europe  of  our 
affairs  results  in  great  weight  being  given 
to  the  speeches  of  American  Senators  and 
Representatives.  Without  doubt,  I  think 
we  may  say  that  in  the  year  1891  abnor- 
mal conditions  kept  foreign  exchange  up 
to  the  gold-exporting  point  for  a  much 
longer  time  than  it  otherwise  would  have 
remained  there ;  and  I  think  the  principal 
abnormal  condition  was  the  absence  of  de- 
sire in  Europe  to  hold  or  to  buy  American 
securities.  If  we  are  bent  upon  free  coin- 
age, Europe  would  best  await  the  result, 
and  most  assuredly  it  would  be  best  for 
Europe  to  allow  us  to  carry  our  own  stocks, 
for  stocks  are  representative  of  legal  money 
only,  whatever  that  may  be.  Many  Euro- 
pean capitalists  fully  believe  that,  do  what 
we  will,  we  have  now  gone  so  far  in  the 
direction  of  the  silver  basis  that  we  cannot 
avoid  arriving  there  ;  and  naturally  these 
capitalists,  at  least,  can  see  no  advantage 
in  holding  American  stocks.1  I  confess  to 
some  sympathy  with  my  countrymen  who 
in  answer  to  all  this  would  say:  Let 
Americans  hold  their  own  stocks  and  bonds 

1  In  1894,  '95,  '96,  the  actual  arrival  at  the  silver  basis  was  avoided 
only  by  bond  issuing. 


Foreign  Exchange.  139 

and  we  shall  be  free  from  this  troublesome 
indebtedness  to  foreigners.  It  certainly 
would  be  better  if  we  could  -hold  them, 
but  unfortunately  we  cannot.  Our  posi- 
tion is  like  that  of  a  man  who  has  a  special 
partner.  The  special  partner  draws  a 
share  of  the  profits,  but  does  no  work,  and 
the  man  who  does  the  work  feels  a  desire 
to  keep  all  the  profits.  If,  however,  he  be 
a  sensible  fellow,  he  will  not  act  in  a  way 
that  shall  lead  to  the  special  partner's  re- 
fusing to  remain  in  the  business,  the  only 
sensible  course  to  pursue  being  to  accumu- 
late so  much  money  that  the  special  part- 
ner shall  not  be  needed.  As  a  nation,  our 
sensible  course  is  to  use  whatever  sum  of 
foreign  capital  we  need  and  can  get  in  the 
development  of  our  industries,  and  to  treat 
the  owners  of  this  capital  as  we  should 
treat  assistants,  not  as  we  should  treat 
enemies.  We  can  hope  for  the  good  time 
when  we  shall  have  accumulated  a  suffi- 
ciency of  capital  of  our  own  for  all  of  our 
wants,  but  until  we  do  obtain  this  owner- 
ship, braggadocio  is  unwarranted.  Our 
true  interest  lies  in  so  acting  that  foreigners 


1 40        Money,  Silver,  and  Finance. 

will  buy  American  securities  and  will  keep 
tbeni  until  we  want  them.  No  true  Ameri- 
can interest  can  be  served  by  teaching 
foreigners  that  our  securities  are  not  good 
securities,  that  the  appearance  of  gold  value 
may  turn  into  the  reality  of  silver  value. 

The     abnormal     factor   in   foreign    ex- 
change,   the    home-cominp;    of    American 

O     '  o 

securities,  is  connected  with  another  abnor- 
mal factor,  the  forcible  holding  of  the  rate 
of  interest  below  the  proper  rate.  Profits 
and  wages  in  this  country  are  higher,  on 
the  average,  than  they  are  in  Europe,  and, 
as  naturally,  interest  should  be  higher  too. 
When,  therefore,  Congress  tries  to  make 
money  plentiful  it  is  apt  to  create  an 
abnormal  factor  in  foreign  exchange,  and 

o  o    ' 

when  Congress  succeeds  in  its  efforts  this 
abnormal  factor  in  foreign  exchange 
operates  to  send  gold  oat  of  the  country. 
In  our  present  state  of  development,  the 
use  of  money  here  ought  to  be  valued 
more  highly  than  the  use  of  money  abroad, 
and  we  have  seen  that  the  rate  of  foreign 
exchange  is  forced  down  toward  the  gold- 
importing  point  and  away  from  the  gold- 

1  The  surplus  of  money  in  1894  was  the  principal  factor  in  for- 
eign exchange  at  that  time. 


Foreign  Exchange.  141 

exporting  point  by  our  comparatively  high 
rate  of  interest.  Make  money  too  plenti- 
ful, then,  and  you  take  away  one  of  the 
inducements  for  foreigners  to  leave  money 
here ;  and  the  only  money  which  they  will 
take  away  is  gold  money.  Issue  too  much 
silver  or  silver  notes  and  you  both  make 
money  too  cheap  and  create  a  fear  of  the 
proximity  of  the  silver  basis.  It  is  true 
that  no  governmental  issues  of  money  can 
hold  down  permanently  the  rate  of  interest, 
but  the  first  effect  is  to  make  money  plen- 
tiful, and  therefore  to  cause  exportation 
of  the  kind  of  money  that  foreigners  want. 
If  the  issue  of  new  money  should  have 
the  effect  of  putting  prices  up,  or  of  hold- 
ing them  above  the  normal  level,  there 
would  necessarily  be  a  still  stronger  tend- 
ency in  gold  to  leave  the  country.  Foreign 
exchange  would  be  kept  at  the  gold- 
exporting  point,  because  Americans  were 
buying  or  holding  too  large  quantities  of 
stocks,  bonds,  or  merchandise.  When  new 
issues  of  money  are  absorbed  by  the 
people,  the  absorption  can  have  a  very  bad 
effect  in  fostering  speculation,,  and  if  it 


1 42        Money,  Silver,  and  Finance. 

have  this  effect  the  inevitable  collapse  is 
sure  to  be  disastrous,  in  a  degree  propor- 
tionate to  the  height  of  the  speculation 
fever.  But  it  must  not  be  assumed  that 
new  issues  of  money  necessarily  affect 
prices.  Indeed,  when  prices  are  affected, 
the  circumstances  are  peculiar,  as  we  shall 
see  in  Chapter  XII.,  on  The  Old  Volume 
of  Money  Theory. 

Gresham's  law,  under  which  "  a  cheaper 
or  depreciated  currency  always  tends  to 
displace  a  more  valuable  one,"1  should  be 
studied  carefully,  because,  in  our  case,  gold 
slips  away  so  easily.  If  we  put  the  rate 
of  interest  below  the  level  which  suits  the 
conditions  of  trade,  if  we  create  or  foster  a 
feeling  among  foreign  buyers  or  holders  of 
American  securities  that  a  foolish  financial 
policy  is  likely  to  be  adopted,  we  inevit- 
ably move  the  rate  of  foreign  exchange 
up  to  the  gold-exporting  point,  or  we  keep 
the  rate  above  the  normal  rate,  that  rate 
which  would  prevail  if  these  abnormal 
factors  were  not  affecting  it.  Gold  may 

1  The  Principles  of  Political  Economy ',  Simon  Newcomb, 
Ph.D.,  LL.D. 


Foreign  Exchange.  143 

be  actually  exported,  or  the  importations 
of  gold  which  otherwise  would  take  place 
may  be  prevented,  but,  as  in  the  course  of 
a  year  gold  generally  moves  both  ways 
across  the  ocean,  the  net  loss  in  a  year,  from 
bad  financial  laws,  must  be  felt.  At  some 
future  time,  perhaps,  we  may  do  very  well 
without  foreign  financial  assistance,  but 
at  present  it  certainly  would  be  wise  for 
legislators  to  fully  acquaint  themselves  with 
the  actual  workings  of  foreign  exchange. 

I  do  not  think  it  requires  any  argument 
to  prove  that  foreign  exchange  cannot 
be  held  at  the  gold-exporting  point  for  a 
very  long  time  without  Americans  seeing 
the  inevitable  consequence,  and  seeing  the 
propriety  of  securing  for  themselves  the 
coming  premium  on  gold. 

NOTE  TO  THIRD  EDITION.— In  1893,  '94,  '95,  American  hoarding  of 
gold  was  very  strongly  stimulated  hy  gold  exportation.  Gold  expor- 
tation was  caused  to  some  extent  by  an  unusual  factor,  that  of 
certain  governments  paying  a  premium  on  gold  or  paying  the  loss 
indicated  in  the  current  rate  of  exchange. 


CHAPTER   IX. 

DISCUSSION    WITH    REPRESENTATIVE    ADVO- 
CATES   OF    SILVER.1 

MR.  H—  — ,  who  favors  American  silver 
exclusively,  finds  no  difficulty  in  answering 
the  champion  of  all  silver,  Senator  Stewart ; 
but  the  difference  between  the  two  gentle- 
men appears  to  be  only  in  degree,  and  I  think 
it  fair  to  call  it  lucky  for  them  that  they  are 
not  proposing  to  run  their  own  affairs  in  the 
manner  suggested  b}^  them  for  the  United 
States.  Apologizing  to  these  gentlemen 
for  being  personal,  the  importance  of  the 
subject  leads  me  to  ask  :  Would  not  Senator 
Stewart's  friends  clap  him  into  an  asylum, 

1  In  the  summer  of  1891,  the  New  York  Evening  Tele- 
gram opened  its  columns  to  a  general  discussion  of  the 
silver  question.  The  author's  part  in  that  discussion  is  re- 
produced here,  after  careful  revision,  and  with  many  additions. 
He  has  not  been  so  anxious  to  avoid  repeating  himself  as  he 
would  have  been  if  the  silver  question  were  less  important, 
and  he  believes  that  reiteration  is  sometimes  in  order. 
144 


Discussion  with  Advocates  of  Silver.   145 

and  would  not  Mr.  H sooner  or  later 

be  placed  out  of  harm's  way  ? 

The  Senator  suggests  the  free  coinage  of 
all  silver,  and  this  means  that  the  United 
States  should  buy,  at  $1.29  an  ounce,  the 
world's  stock  or  surplus  of  what  it  values 
at  less  than  $1  an  ounce.1  As  a  rule,  sane 
people  do  not  pay  more  than  the  market 
pi-ice  of  anything  and  do  not  try  to  change 
the  world's  market  price  at  the  expense  of 
their  own  pockets. 

Let  us  see  what  would  happen  if  the 
Senator  should  have  his  way.  The  fact 
that  there  is  an  immense  surplus  of  silver 
in  the  world  is  proved  by  there  having 
been  a  great  increase  in  production  and  a 
great  decline  in  market  price ;  and  if  there 
is  not  enough  silver  for  the  United  States 
to  draw  upon  there  are  surely  plenty  of 
mines  which  at  higher  market  prices  could 
produce  any  lacking  quantity.  If  now  we 
pay  $1.29  per  ounce  that  price  would  be- 
come the  market  price,  but  only  at  the 
point  of  delivery  to  the  United  States  Mint. 
At  all  other  points  the  bullion  dealers 
would  necessarily  fix  the  price  at  $1.29  per 

1  Less  than  seventy  cents  in  1896. 


146        Money,  Silver,  arid  Finance. 

ounce,  less  the  cost  of  carriage  to  the 
United  States  Mint,  and  less  a  fair  profit 
for  the  risk  that  the  United  States  might 
see  its  own  folly  and  stop  buying  silver 
before  delivery  could  be  made.  The 
world's  dealers  in  bullion  know  the  amount 
of  gold  in  the  Treasury  of  the  United 
States  and  know  that  European  govern- 
ments are  anxious  to  obtain  gold  and  to 
get  rid  of  silver.  The  problem  for  the 
bullion  dealers  would  be :  How  long  can 
or  will  the  United  States  take  silver  and 
pay  out  gold?  The  questions  in  the 
United  States  would  be :  How  quickly 
can  we  stop  taking  the  world's  silver  and 
giving  the  world  our  gold,  and  what  ade- 
quate punishment  can  be  inflicted  upon 
Senator  Stewart  and  his  friends  ?  And, 
reading  of  the  Senator's  being  hanged  in 
effigy  all  over  the  United  States  by  patri- 
otic small  boys,  the  world's  bullion  dealers 
would  hurry  on  their  silver  and  would 
reduce  their  purchases  of  it.  The  market 
price  of  silver,  therefore,  would  never 
quite  reach  the  Treasury  price  of  $1.29 
per  ounce. 


Discussion  with  Advocates  of  Silver.    147 

All  this  is  clear  to  Mr.  H—  -  and  so 
he  wants  us  to  buy  American  silver  only, 
still  at  $1.29  per  ounce,  although  American 
silver  is  worth  no  more  in  the  world's  mar- 
kets than  any  other  silver.  If  this  idea 
should  prevail,  the  question  with  American 
miners  would  be  :  How  much  can  \ve  in- 
crease our  production  and  how  much  silver 
can  we  deliver  at  the  Mint  before  the  gov- 
ernment shall  see  the  need  to  stop  buying? 

I  may  be  pardoned  for  saying  just  here 
that  it .  was  hardly  necessary  for  Mr. 

H to  state  that  he  is  engaged  in 

silver-mining.  And  I  would  ask  if  he 
would  guarantee  that  Mexican  silver  shall 
not  be  carried  to  American  mines  and 
thence  to  the  United  States  Mint?  Does  he 
propose  that  Treasury  officials  shall  keep 
watch  over  every  hole  in  American  ground 
to 'prevent  it  being  stocked  with  Mexican 
silver  and  then  developed  into  an  Ameri- 
can silver  mine  ? 

Will  he  furnish  to  the  Treasury,  experts 
who  are  capable  of  telling  the  difference 
between  American  and  foreign  silver  ?  Is 
there  a  distinguishable  difference  ? 


1 48        Money,  Silver,  and  Finance. 

If,  to  stop  importations,  Mr.  H < 

would  tax  importations  of  silver,  how 
would  he  avoid  taxing  such  silver  as  had 
been  previously  exported,  and,  would  not 
his  law  violate  the  constitution  which  pro- 
hibits the  taxing  of  any  article  exported 
from  any  State?  Importers  of  silver,  in 
order  to  avoid  the  paying  of  duty  upon  it, 
would  claim  that  their  particular  lots  of 
silver  were  American  silver  and  therefore 
exempt  from  taxation. 

Surely  common  sense  has  a  place  in  this 
discussion,  and  the  silver  men  should  be 
willing  to  allow  the  United  States  to  buy 
as  cheaply  as  possible,  for  in  this  way  the 
United  States  can  buy  about  one  third 
more  in  quantity,1  to  say  nothing  of  the 
fact  that  this  way  would  be  more  fair  to 
all  taxpayers  who  must  pay  for  the  pur- 
chases. It  has  been  shown  by  years  of 
trying  to  make  silver  circulate,  that  Ameri- 
cans will  not  carry  much  silver  in  their 
pockets  and  cannot  be  induced  to  do  so ; 
and  it  can  be  assumed  that  the  silver  which 
the  government  takes,  it  will  be  obliged 
to  pile  up  on  top  of  its  already  enor- 

i  1896.  Nearb*  twice  the  quantity. 


Discussion  with  Advocates  of  Silver.   149 

mo  us  stock,  and  will  be  obliged  to  hold 
until  such  time  as  it  sees  fit  to  sell  to  the 
world  and  at  the  world's  price.  The 
higher  the  price,  too,  which  the  govern- 
ment pays  for  silver,  the  greater  will  be 
the  stimulation  to  silver-mining  all  over 
the  world,  unless  the  government  should 
quickly  obtain  all  it  could  pay  for,  or 
quickly  abandon  its  position  of  buyer. 

Free  coinage,  or  what  is  the  same  thing, 
the  paying  of  $1.2929  an  ounce  for  a  metal 
worth  less  than  $1,  would  make  us  the 
world's  laughing-stock,  and  European 
governments  would  vie  with  each  other  in 
the  struggle  to  get  our  gold  before  we 
should  be  able  to  comprehend  the  point 
of  the  joke. 

Somewhat  farther  away  from  lunacy  is 
the  present  law,1  by  the  operation  of  which 
the  United  States  was  changed  from  a  sil- 
ver exporting  to  a  silver-importing  or  non- 
exporting  country.  Even  paying  only  the 
market  price  the  Treasury  has  shown  itself 
to  be  the  world's  best  buyer  of  silver,  and 
according  to  the  report  of  the  Secretary  of 
the  Treasury,  1890,  the  natural  flow  of  silver 

*  Repealed  in  1893. 


150        Money,  Silver,  and  Finance. 

from  the  American  mines  to  Oriental  coun- 
tries had  been  stopped.  The  Orientals 
who  use  silver  for  money,  and  exclusively, 
can  get  along  with  a  diminished  supply  to 
accommodate  the  vaults  of  the  United 
States  Treasury,  and  is  it  to  be  supposed 
that  the  Orient  can  spare  none  of  its  stock 
if  we  offer  to  pay  an  advance  of  thirty  per 
cent.  ?  But  the  Orient  does  not  want 
gold  money  and  Europe  does,  and  the 
question  is,  How  much  silver  could  Europe 
and  the  Orient  and  the  rest  of  the  world 
spare  to  fill  our  Treasury  vaults  ? 

If  I  understand  Mr.  Win.  P.  St.  John 
(New  York  Evening  Telegram,  August  1 5, 
1891),  he  relies  upon  the  fact  that  the 
European  coinage  parity  of  silver  to  gold 
is  15^  to  1,  whereas  our  coinage  parity  is 
16  to  1,  this  difference  making  silver  money 
abroad  worth,  nominally,  about  $1.33  per 
ounce,  while  here  it  is  worth,  nominally, 
$1.2929  per  ounce.  Mr.  St.  John  argues 
that  the  silver  money  of  Europe  would 
not  come  here,  under  free  coinage  in  this 
country,  because  we  should  then  be 
offering  to  pay  only  $1.2929  per  ounce 


Discussion  with  Advocates  of  Silver.   151 

for  that  which  is  worth  at  home  $1.33  per 
ounce. 

The  Bank  of  France  now  holds  the 
equivalent  of  about  $260,000,000  in  gold 
and  of  about  $245,000,000  in  silver.  The 
market  value  of  the  gold  as  bullion  is 
$260,000,000,  but  the  market  value  of  the 
silver  is  less  than  $171,500,000— say  thirty 
per  cent,  lower  than  the  nominal  value. 
Suppose,  now,  that  the  United  States 
government  should  say  to  the  Bank  of 
France:  Give  us  $100,000,000  in  silver 
and  we  will  give  you  $97,000,000  in  gold, 
or  reduce  your  nominal  valuation  by  three 
per  cent.,  and  we  will  give  you  gold  which 
possesses  actual  value  more  than  thirty 
per  cent,  greater.  If  Mr.  St.  John  were  a 
director  in  the  Bank  of  France,  he  would 
vote  Nay,  and  would  contend  that  market 
value  is  of  no  consequence,  nominal  value 
being  all  that  need  be  considered.  But  he 
would  be  outvoted,  for  some  bright  French- 
man would  say :  "  Let  us  take  the  Ameri- 
can gold,  and  after  we  get  it  we  can,  if  we 


1 5  2        Money,  Silver,  and  Finance. 

like,  purchase  silver  at  the  market  price. 
I  think  we  should  find  ourselves  in  posses- 
sion of  much  more  silver  than  we  have 
now,  the  increase  in  quantity  being  the 
profit  on  the  transaction.  Lose  sight  of 
coinage  parity  for  a  while  and  consider  only 
market  value.  Sell  silver  at  about  thirty 
per  cent,  above  the  present  market  value, 
coin  the  incoming  gold  into  napoleons  and 
ten-  and  five-franc  pieces,  take  any  chances 
that  the  market  value  of  silver  will  go  up 
to  $1.29  or  $1.33  per  ounce,  and  remain 
there ;  and  when  we  get  ready  to  do  so 
and  think  it  advisable  to  do  so,  we  can 
begin  to  buy  silver  in  such  small  quantities 
as  absolutely  needed,  so  as  to  get  back  in 
time  an  equivalent  sum  of  silver  at  lowest 
market  prices." 

When  Mr.  St.  John  lends  the  money  of 
his  own  bank  upon  securities,  I  presume 
that  he  takes  into  consideration  the  sal- 
able value  of  those  securities,  rather  than 
the  nominal  value ;  and  if  he  were  a  db 
rector  in  the  Bank  of  France,  I  believe 
that  he  could  be  shown  the  advisability  of 
losing  three  per  cent,  in  the  nominal  value 


Discussion  with  Advocates  of  Silver.    153 

of  the  assets  of  the  Bank,  if  by  so  doing 
the  Bank  could  gain  thirty  per  cent,  in  its 
real  assets. 

If  it  should  be  argued  that  free  coinage 
here  or  unlimited  purchase  would  put  up  the 
price  of  silver  bullion,  and  the  Bank  of 
France  thus  would  never  be  able  to  get  back 
its  silver,  and  would  be  obliged  to  lose  the 
three  per  cent.,  still  it  must  be  admitted 
that  a  permanent  advance  in  the  price  of 
silver  bullion  is  at  least  doubtful,  and  even 
if  the  advance  should  prove  to  be  perma- 
nent, the  loss  is  only  three  per  cent.,  while 
in  the  view  of  non-permanency  of  the  ad- 
vance the  gain  is  thirty  per  cent.  Who, 
as  a  director  in  the  Bank  of  France,  would 
not  gladly  vote  to  give  in  silver  $100,000,- 
000  or  $200,000,000,  nominal  value,  for 
$97,000,000  or  $194,000,000' in  gold,  both 
real  and  nominal  value  ? 

If  the  reader  will  drop  from  his  mind 
parity  of  coinage,  as  a  good  merchant  some- 
times dismisses  a  mere  book-keeping  ques- 
tion, in  order  to  obtain  a  perfectly  clear 
view  of  a  subject,  there  need  be  no  diffi- 
culty in  seeing  that  should  the  Bank  of 


1,54        Money,  Silver,  and  Finance. 

France  sell  100,000,000  ounces  of  silver 
for  $129,290,000,  and  later  on,  years  later 
perhaps,  should  buy  100,000,000  ounces 
of  silver  for  $100,000,000,  the  Bank  will 
make  a  profit  of  $29,290,000.  Or,  on  200,- 
000,000  ounces  the  profit  would  be  $58,580,- 
000.'  It  might  well  be  reasoned  that  our 
buying  of  silver  would  so  stimulate  pro- 
duction that  silver  would  in  time  go  to  a 
price  lower  than  any  yet  recorded,  or  it 
might  be  considered  good  financiering  to 
never  buy  back  the  silver  at  all,  for  so  the 
Bank  of  France  would  be  put  in  a  position 
similar  to  that  held  by  the  Bank  of  Eng- 
land. In  any  case,  the  selling  of  100,000,- 

000  or  200,000,000  ounces   of    silver  for 
29  to  30  per  cent,  more  than  the  market 
value,  would  l>e  a  wise  thing  to  do  ;  and 

1  cannot   think  that  it  requires  a  strong 
imagination  to  picture  even  now  a   wily 
Gaul,  quietly  chuckling  over  the  utterances 
of  our  St.  Johns,  our  Stewarts,  our  Pughs, 
our  Blands,  and  our  Bartines,  and  hoping 
and  praying  that  these  men  will  succeed  in 
giving  him  the  one  opportunity  of  his  life 
for  a  brilliant  coup  de  finance. 

1  Say  $100,000,000  profit  in  1896. 


Discussion  with  Advocates  of  Silver.    155 

If,  instead  of  free  coinage  or  unlimited 
purchase,  a  measure  were  proposed  to  try 
free  coinage  for  one  year,  scarcely  anybody 
could  fail  to  see  that  the  world  and  the 
world's  miners  would  send  a  fabulous  quan- 
tity of  silver  to  the  Treasury  in  order  to 
obtain  $1.29  per  ounce  for  a  metal  the 
value  of  which  would  be  sure  to  fall  to 
less  than  $1  per  ounce  as  soon  as  the  year 
had  expired.  And  what  reason  is  there  to 
suppose  that  under  a  free-coinage  law  un- 
limited in  time  the  financial  men  of  the 
world,  noticing  the  piling  up  of  silver  in 
the  United  States  Treasury,  would  be 
unable  to  foresee  that  the  law  must  in  time 
be  repealed  ? 

The  present  price  of  silver  is  upheld  by 
the  Treasury's  monthly  purchase1  of  an 
amount  about  as  great  as  the  whole  prod- 
uct of  the  American  mines ;  and  upheld, 
also,  by  the  purchase  of  large  quantities  of 
silver. for  use  in  the  arts,  because  of  the 
comparatively  low  price  of  the  metal. 
But  if  you  drive  manufacturers  into  the 
habit  of  using  less  silver,  and  if  you  fill 
the  treasury  so  full  that  necessity  or  a 

1  Stopped  in  1893. 


156        Money,  Silver,  and  Finance. 

revulsion  in  public  sentiment  shall  shut  up 
this  dumping-hole,  what  then  would  be 
the  market  price  of  silver  in  the  face  of  a 
phenomenally  large  production?  No  law 
can  be  passed  which  could  not  be  repealed, 
and  therefore  the  question  for  those  en- 
gaged  in  the  silver  industry  appears  to  be 
this :  Would  the  profit  of  an  advance  in 
the  price  of  silver  for  a  short  time  cover 
the  later  loss  of  a  heavy  decline  to  last  a 
very  long  time?  What  would  be  the  mar- 
ket price  of  silver  if,  to  get  back  to  the 
gold  basis,  the  United  States  Treasury, 
instead  of  buying  4,500,000  ounces  of 
silver  per  month,  should  become  a  seller 
of  silver?  The  quantity  of  silver  which 
could  be  supplied  to  the  Treasury  by  the 
world,  assisted  by  the  world's  mines,  at 
$1.29  per  ounce,  is  unlimited ;  not  so  the 
amount  which  the  world  could  be  induced 
to  take  back  at  $1,  or  even  75  cents 
per  ounce,  if  I  may  be  allowed  to  guess  at 
a  figure. 

Whoever  has  been  interested  in  trying 
to  corner  a  commodity,  or  has  read  of  such 
attempts,  like  that,  for  instance,  of  the 


Discussion  with  Advocates  of  Silver.    157 

Societe  cles  Metaux,  in  its  trying  to  control 
the  price  of  copper,  must  know  that  even 
the  Treasury  of  tlie  United  States  is  not 
sufficiently  powerful  to  hold  up  the  price 
of  silver.  The  visible  supply  is  said  to  be 
a  small  amount,  but  the  visible  supply  is 
nothing  compared  to  the  invisible  supply, 
and  if  the  United  States  should  adopt  free 
coinage  or  unlimited  purchase,  this  question 
would  inevitably  present  itself:  Which 
can  hold  out  the  longer,  the  United  States 

o        > 

Treasury  in  receiving  silver,  or  the  bowels 
of  the  earth  in  delivering  silver  ? 

NOTE — The  term  free  coinage  is  used  in  this  volume  in  the 
American  popular  sense,  indicating  coining  freely  or  to  an 
unlimited  extent.  Seigniorage  (minting  charge)  is  not  coiu 
sidered. 


CHAPTER  X. 

THE    DISCUSSION    CONCLUDED. 

I  GLADLY  apologize  to  Senator  Stewart  fox 
seriously  offending  him  (indicated  in  a  news- 
paper letter  by  the  Senator),  and,  in  order 
to  be  sure  of  suiting  the  gentleman,  I  will 
now,  so  far  as  possible,  use  his  own  language. 
'If  he  be  involved  in  errors  and  inconsist- 
encies he  may  charge  the  trouble  to  his 
being  on  the  wrong  side  of  the  question. 
He  need  not  consider  the  affair  wholly 
personal.  In  this  chapter  quotation  marks 
will  be  used  only  to  designate  the  words 
of  the  distinguished  Senator,  extracts  being 
made  from  the  Evening  Telegram  of  July 
30,  August  5,  and  August  18,  1891. 

He  claims  to  have  "  proved  that  the 
people  of  the  United  States  could  not  be 
injured  by  free  coinage,"  and  alludes  to  "  the 
impossibility  of  a  flood  of  silver."  The  basis 
for  this  may  be  his  statement  as  follows : 
158 


The  Discussion  Concluded.          159 

"  The  supply  of  gold  and  silver  from 
the  mines  was  more  nearly  equal  at  the 
time,  and  since  silver  was  demonetized, 
than  at  any  other  period  of  which  the 
record  has  been  preserved.  There  was,  in 
1873,  a  little  more  gold  produced  in  the 
world  than  silver.  There  has  been  since 
that  time  a  little  more  silver  produced 
than  gold.  But  during  the  twenty-three 
years  from  1850  to  1873  there  was  about 
three  times  as  much  gold  produced  as  silver." 

Here  we  have  on  Mr.  Stewart's  own 
authority  proof  of  the  naturalness  of  the 
decline  in  the  value  of  silver,  as  distinct 
from  the  u  demonetization  "  charge,  which 
he  is  so  fond  of  making.  Up  to  1873,  on 
a  very  large  production  of  gold  and  a  very 
small  production  of  silver,  the  ratio  of 
15^  to  1  was  easily  maintained;  that  is  to 
say,  on  this  parity  of  value,  the  production 
of  each  metal  corresponded  somewhat 
closely  to  the  demand  for  each,  the  pro- 
duction of  gold  being  "  three  times "  as 
great  as  the  production  of  silver. 

But  the  production  of  silver  has  far  ex- 
ceeded the  demand  for  it,  and  therefore  the 


160        Money,  Silver,  and  Finance. 

price  lias  necessarily  fallen.  Note  how  the 
ratio  of  the  world's  production  of  the  two 
metals  has  changed,  as  shown  in  the  follow- 
ing table  taken  from  the  Engineering  and 
Mining  Journal  of  July  25,  1891,  the  fig- 
ures being  the  United  States  coining  value  : 1 

Gold.  Silver. 

1855 .  132,000,000  40,000,000 

i860 127,000,000  40,000,000 

1865 126,000,000  52,000,000 

1870 123,000,000  64,000,000 

1875 1 11,000,000  82,000,000 

1880 108,000,000  101,000,000 

1 88 1 104,000,000  106,000,000 

1882 100,000,000  1 1 1,000,000 

1883 97,000,000  115,000,000 

1884 100,000,000  120,000,000 

1885 106,000,000  125,000,000 

1886 106,000,000  130,000,000 

1887 106,000,000  136,000,000 

1888 1 10,000,000  146,000,000 

1889 J  20,000,000  159,000,000 

If  the  annual  production  of  silver  were 
now  equal  only  to  one  third  the  produc- 
tion of  gold,  or,  say,  perhaps,  not  over  half 
as  great  as  the  production  of  gold,  pos- 

1  1896.  The  coinage  values  of  the  annual  production  of  the  two 
metals  are  now  about  equal— close  to  $200.000.000.  The  market  value 
of  the  silver  annually  produced  is  about  $100,000,000. 


The  Discussion   Concluded.         161 

sibly,  indeed,  if  the  production  of  silver 
had  not  overtaken  the  production  of  gold, 
the  old  ratio  of  15^  or  16  to  1  would 
be  maintainable.  In  other  words,  if  15^  or 
16  to  1  was  the  proper  ratio  when  "three 
times  as  much  gold"  w^as  produced  as 
silver,  then  15^  or  16  to  1  cannot  possibly 
be  the  proper  ratio  to-day.  The  world's 
markets  say  that  to-day's  ratio  is  about 
21  to  I,1  and,  in  view  of  the  figures  above 
given,  I  do  not  see  how  Mr.  Stewart  can  rea- 
sonably find  fault  with  the  world's  opinion. 
If  we  say  that  the  growth  of  business 
demands  an  ever  increasing  supply  of 
money,  losing  sight  of  the  fact  that  bank- 
ing facilities  keep  pace  with  business  and 
largely  supply  its  needs,  making  a  dollar 
more  and  more  important  as  a  measure  of 
value  and  less  and  less  important  as  a 
means  of  exchange ;  or,  if  we  say  that 
an  annually  increasing  crop  of  money  is 
needed  just  as  much  as  we  need  an  annu- 
ally increasing  crop  of  wheat,  losing  sight 
of  the  fact  that  wheat  is  consumed  while 
money  is  largely  preserved,  still  we  have 
no  ground  for  assuming  that  there  is  any 

i  1896.    About  31  to  1. 


1 62         Money,  Silver,  and  Finance. 

need  for  the  disproportionately  great  pro- 
duction of  silver.  On  the  contrary,  the 
fall  in  the  price  of  silver,  from  $1.29  per 
ounce  to  ninety-seven  cents  per  ounce,1 
shows  that  no  matter  how  badly  the  world 
needs  money,  it  prefers  all  the  evils  of  the 
shortage  rather  than  the  use  of  more  silver. 
The  worthy  advocate  of  silver  may  insist 
that  the  world  is  mistaken  in  this  choice, 
but  certain  it  is  that  the  world  has  made 
such  a  choice,  else  the  parity  of  15 \  or  16 
to  1  would  never  have  changed  to  that  of 
21  to  I.8 

Let  me  here  make  again  the  distinction 
between  money  and  wealth,  terms  too  fre- 
quently used  as  synonymous.  There  is 
always  an  insatiable  demand  for  wealth, 
but  the  demand  for  money  is  limited,  like 
the  demand  for  a  commodity.  More  closely 
limited,  of  course,  is  the  demand  for  a 
kind  of  money  upon  which  suspicion  has 
been  cast. 

The  whole  world,  however,  does  not 
take  the  same  view  of  silver.  It  is  good 
enough  money  yet  for  some  countries,  and 
there  is  left  open  to  Senator  Stewart  the 

1  IS.,6.    About  sixty-eight  cento. 

3  Now  about  31  to  1. 


77/6'  Discussion  Concluded.          163 

course  of  educating  the  people  of  Europe  and 
the  United  States  up  to  the  standard  of 
China,  India/  Peru  and  Mexico  !  After  all, 
a  mere  free-coinage  or  unlimited-purchase 
bill  could  have  little  effect  upon  the  price 
of  silver  compared  to  such  an  effect  as 
would  come  from  teaching  civilized  people 
that  they  ought  to  carry  the  white  metal 
and  overlook  its  depreciation.  Education 
strikes  at  the  root  of  the  evil ;  any  act  of 
Congress  may  be  undone  by  a  subsequent 
Congress ! 

In  the  column  next  to  the  one  contain- 
ing the  Senator's  assurance  of  an  "impossi- 
bility of  a  flood  of  silver/'  August  18th, 
the  newspaper  said :  Silver  is  top-heavy. 
(It  was.)  There  is  much  talk  of  a  flood 
of  silver  from  over  the  water.  Holland 
has  149,000,000  florins  in  the  treasury  for 
which  there  is  no  call  in  circulation.  The 
Dutch  and  German  ministers  thin-k  they 
will  take  no  more  chances,  but  will  sell 
their  silver  this  year;  and  more  news,  or 
rumors,  of  this  tenor.  It  is,  of  course,  a 
matter  of  conjecture  what  European  gov- 

1  Even  in  India  free-coinage  found  its  limit,  and  was  stopped  in 


1 64        Money,  Silver,  and  Finance. 

ernments  will  do,  but  it  cannot  be  ques- 
tioned that  their  actions  for  eighteen  years 
indicate  a  strong  desire  to  obtain  gold  and 
to  give  silver  in  exchange.1 

What  European  ministers  say,  is  a  ques« 
tion  of  policy,  and  if  a  government  wish 
to  give  silver  for  gold  that  government's 
financial  minister  cannot  be  expected  to 
say  anything  which  would  weaken  the 
cause  of  free  coinage  or  unlimited  purchase 
in  America.  To  get  rid  of  silver  he  must 
have  a  market;  to  obtain  gold  he  must 
have  a  source  of  supply.  Under  free 
coinage  or  unlimited  purchase  we  should 
furnish  both.  Perhaps,  however,  Senator 
Stewart  will  be  more  easily  convinced  that 
there  is  a-  European  demand  for  gold  if  I 
use  his  own  words : 

"I  called  attention  to  the  fact  that  all 
the  great  monetary  institutions  in  Europe 
and  America,  where  the  gold  standard  is 
maintained,  were  deficient  in  reserves  to 
meet  their  obligations,  and  they  were 
struggling  for  more  gold  and  reducing 
credits  to  save  themselves  from  bank- 
ruptcy." 

1  1896.  Austria-Hungary  is  accumulating  gold,  having  decided 
upon  gold  resumption.  Silver  has  proved  burdensome. 


The  Discussion  Concluded.          165 

Possibly  Mr.  Stewart  may  have  been 
posing  as  a  world's  philanthropist,  for  in 
another  place  he  said : 

"We  have  already  shown  that  gold 
would  be  cheaper  in  Europe  if  they  had 
more  of  it,  as  they  would  have  if  they  had 
all  the  gold  in  this  country,  and  in  that 
case  he  ( the  debtor  )  could  get  more  gold 
for  the  same  property  than  he  now  can, 
and  could  pay  his  debts  with  less  sacrifice, 
no  matter  whether  his  debt  was  a  gold 
obligation  or  an  obligation  to  pay  in  the 
currency  of  the  United  States." 

The  benefit  to  Europe  from  having  our 
gold  is  perfectly  clear ;  not  so  the  benefit 
to  us  from  losing  our  gold,  one  third  of  our 
circulating  medium,  even  if  we  could  be 
summarily  educated  up  to  the  belief  that 
silver  is  just  as  good  as  gold. 

The  Senator  says  that  if  I  "  had  taken 
the  trouble  to  read  "  one  of  his  articles  I 
"  would  have  been  saved  the  trouble  of 
many  mistakes  and  erroneous  statements 
with  regard  to  paying  $1.29  for  a  dollar's 
worth  of  silver."  According  to  the  Sena- 
tor there  is,  then,  an  important,  and  not 


1 66        Money,  Silver,  and  Finance. 

merely  a  technical,  difference  between  free 
coinage  and  a  policy  of  purchasing  silver 
at  $1.29  per  ounce.  But  if  he  will  admit 
that  480  grains  make  one  ounce  and  also 
that  the  silver  dollar  contains  371^  grains, 
then  I  do  not  see  how  he  can  escape  from 
the  truth  of  a  simple  equation :  480  times 
1  equals  371 J  times  1.2929.  He  says: 
"  Under  the  Bland  act  the  government 
bought  a  lar^e  amount  of  silver  bullion 

o  o 

from  the  miners  at  the  market  price,  coined 
it  into  silver  dollars  and  paid  it  out  for 
current  expenses.  By  this  transaction  the 
director  of  the  Mint  informs  us  that  the 
government  made  a  clean  profit  of  $70,- 
000,000  between  the  market  price  of  the 
bullion  so  purchased  and  the  coin  value 
of  the  silver  dollar."  And  he  also  says: 
"Under  the  law  of  1890,  now  in  force,1 
the  government  does  not  buy  silver  with 
money  raised  by  taxation,  but  issues  Treas- 
ury notes  for  silver  bullion  at  the  market 
price,  dollar  for  dollar.  The  silver  bullion 
as  received  is  deposited  in  the  Treasury, 
and  the  Secretary  is  authorized  by  law  to 
coin  it  into  standard  dollars.  By  doing 

1  Repealed  in  1893. 


The  Discussion  Concluded.         167 

so  the  government  will  make  the  differ- 
ence between  the  market  price  of  silver 
and  the  coin  value,  which  is  now  about 
twenty-five  per  cent." 

From  the  equation  above  given,  from 
the  fact  that  silver  is  worth  about  ninety 
seven  cents  per  ounce,  and  from  the  Sena- 
tor's own  words,  is  it  not  perfectly  cleai 
that  the  profit  which  the  government 
makes  is  due  wholly  to  our  not  having 
free  coinage  ?  Is  it  not  certain  that  this 
profit,  now  owned  by  the  whole  people, 
represented  by  the  government,  would, 
under  free  coinage,  have  gone  into  the 
pockets  of  miners,  bullion  dealers,  and 
speculators  ? 

Under  free  coinage  the  government 
would  take  an  unlimited  amount  of  sil- 
ver, and  would  give  in  exchange  one  dol- 
lar for  every  unit  of  371-J-  grains.  Under 
a  law  which  should  provide  for  the  pur- 
chase of  an  unlimited  amount  of  silver  at 
$1.2929  per  ounce,  the  government  would 
pay  out  a  similar  sum  of  money  for  a  simi- 
lar quantity  of  silver.  Some  free-coinage 
advocates  themselves  speak  of  free  coinage 


1 68        Money,  Silver,  and  Finance. 

as  sure  to  raise  the  world's  price  of  silver 
to  $1.29  per  ounce,  but  a  technical  differ- 
ence is  immensely  important  to  Senator 
Stewart.  And  he  is  quite  right,  for  if, 
instead  of  favoring  free  coinage  he  should 
favor  the  same  thing,  under  a  different 
name,  say  a  bill  to  compel  the  United 
States  Treasury  to  purchase  the  world's 
surplus  stock  of  silver  and  the  world's 
future  surplus  product  of  silver,  at  $1.29 
per  ounce,  he  would  have  no  chance  of 
success. 

The  nervousness  of  the  silver  advocates 
whenever  free  coinage  is  spoken  of  as 
equivalent  to  an  unlimited  purchase  of 
silver  at  $1.2929  per  ounce  was  instanced 
when  Mr.  Leech,  the  Director  of  the  Mint, 
was  examined  by  the  House  Committee 
on  Coinage,  Weights,  and  Measures,  Fifty- 
first  Congress  : 

"  Mr.  Taylor  :  Would  free  coinage  make 
silver  any  more  valuable  provided  there 
were  no  provision  to  compel  the  govern- 
ment to  purchase  the  coin  ? 

"  Mr.  Leech  :  Free  coinage  in  this  bill  is 
in  itself  a  purchase. 


The  Discussion  Concluded.          169 

"  Mr.  Taylor :  Not  on  the  part  of  the 
government  ? 

"  Mr.  Leech  :  Why,  certainly.  This  is  a 
bill  for  the  free  purchase  of  silver.  Un- 
der the  present  law  if  we  had  free  coinage 
it  would  be  the  same  thing,  because  they 
would  simply  deposit  their  silver  and  get 
silver  certificates. 

"  Mr.  Taylor :  Suppose  they  did  not 
have  that  provision ;  they  did  not  for- 
merly have  it ;  suppose  that  was  stricken 
out? 

"  Mr.  Leech :  That  would  necessarily 
limit  the  output  of  silver  dollars  to  the 
capacity  of  the  mints  to  coin. 

"  Mr.  Taylor :  Would  that  increase  the 
value  of  silver  ? 

"  Mr.  Leech  :  I  think  it  would. 

"  Mr.  Walker :  I  should  like  to  ask  the 
Director  whether  he  means  by  that,  if  this 
country  alone  granted  free  coinage  that 
would  of  itself  make  the 'silver  dollar  and 
the  gold  dollar  interchangeable  in  this 
country;  simply  granting  free  coinage  at 
the  present  ratio  of  weights  ? 

"  Mr.  Leech :    It  would  make  it  inter- 


1 70        Money,  Silver,  and  Finance. 

changeable  as  long  as  we  had  gold  dollars 
to  interchange. 

"  Mr.  Walker :  How  long  do  you  think 
that  would  be  ? 

"  Mr.  Leech :  That  depends  on  how 
much  silver  came  here,  and  how  many 
legal-tender  notes  were  paid  out  in  the 
purchase  of  it,  and  to  what  extent  gold 
was  hoarded  or  left  the  country.  I  do  not 
think  it  would  be  very  long. 

"  Mr.  Vaux :  Would  it  appreciate  it  or 
depreciate  it  ? 

"  Mr.  Leech :  I  think  the  effects  of  this 
bill1  would  be  to  attract  to  our  mints  large 
quantities  of  silver.  I  believe  the  current 
product  of  the  world  would  naturally 
move  here.  In  addition  to  that,  I  believe 
that  European  countries  would  avail  them- 
selves of  this  opportunity,  which  they  be- 
lieve cannot  last,  to  get  rid  of  their  embar- 
rassing stocks  of  silver  and  adopt  the 
gold  standard.  I  believe  Austria-Hungary 
would  resume  specie  payments  on  the  gold 
basis.  She  cannot  resume  on  the  silver 
basis.  I  think  they  would  avail  them- 
selves of  this  opportunity  to  convert  their 

1  One  of  the  inauy  free-coinage  bills. 


The  Discussion  Concluded.         1 7 1 

silver  coins  into  our  full  legal-tender 
money  and  get  our  gold  for  them  even  at  a 
slight  loss.  I  think  other  European  coun- 
tries would  do  the  same.  I  think  that  is 
proven  by  the  fact  that  European  countries 
are  doing  that  now,  or,  at  least,  seriously 
considering  it. 

***** 

"  Mr.  Vaux  :  Does  this  bill  provide  that 
the  government  shall  buy  silver  at  a  cer- 
tain price? 

"  Mr.  Leech :  At  a  fixed  price,  $1.2929 
per  fine  ounce. 

***** 

"  Mr.  Bland  :  Do  you  believe  that  under 
free  coinage  the  government  buys  any- 
thing at  all  ? 

"Mr.  Leech  :  Under  this  bill  they  would. 
I  understand  Mr.  Eland's  bill  makes  all  the 
certificates  full  legal  tender. 

"  Mr.  Bland  :  I  simply  mean  free  coinage 
stripped  of  any  certificates.  I  mean  the 
naked  question  of  free  coinage  stripped  of 
any  certificates.  Do  you  believe  that  un- 
der free  coinage  the  government  buys  any- 
thing at  all  ? 


172        Money,  Silver,  and  Finance. 

"  Mr.  Vaux  :  The  people  do  not  give  it 
to  the  government. 

"  Mr.  Williams :  How  much  does  it  cost 
the  government  every  year  ? 

"  Mr.  Bartine :  Just  what  it  costs  to  coin  it. 

"  Mr.  Bland :  The  government  has  no 
responsibilities  after  it  is  coined. 

"  Mr.  Leech  :  Yes,  sir ;  it  requires  that 
it  shall  be  taken  as  full  legal  tender  in  the 
payment  of  all  debts.  The  government 
does  not  simply  coin  it  and  stamp  it. 

u  Mr.  Bland  :  The  government  does  not 
buy  it  and  it  is  not  responsible  for  it. 

"  Mr.  Leech :  The  government  is  re- 
sponsible for  it. 

"  Mr.  Bland :  If  it  were  it  would  keep 
it  at  par  with  gold. 

"  Mr.  Leech  :     Why  so  ? 

"  Mr.  Bland :  Because  gold  is  the  stand- 
ard of  value  in  the  United  States.  Has 
not  the  Congress  as,  much  right  to  make 
silver  the  standard  ? 

"Mr.  Leech:     Certainly. 

"  Mr.  Bland  :  Is  not  Congress  the  repre- 
sentative of  the  people  ? 

"  Mr.  Leech  :     Yes,  sir. 


The  Discussion  Concluded.          1 73 

"  Mr.  Bland  :  When  you  talk  about  the 
purchase  of  silver,  where  is  the  purchase 
on  the  part  of  the  government  any  more 
than  the  purchase  of  gold  ? 

"  Mr  Leech :  We  purchase  gold  now. 
We  do  not  take  gold  and  coin  it  for  the 
people.  That  is  the  theory  of  the  law. 
We  give  a  man  a  check  as  soon  as  it  is 
assayed.  We  would  do  the  same  with  sil- 
ver under  your  bill.  I  do  not  see  any 
practical  difference  between  free  coinage 
and  unlimited  purchase  of  silver  except  one 
is  a  shorter  method. 

"  Mr.  Bland  :  That  is  discretionary  with 
the  depositor.  The  depositor  has  the  right 
to  wait  until  he  gets  his  coin. 

"  Mr.  Leech  :     He  does  not  want  to  wait. 

"  Mr.  Bartine  :  It  is  merely  to  obviate 
the  necessity  of  waiting  ? 

"  Mr.  Leech  :  Yes,  sir. 

"Mr.  Walker:  Jf  I  understand  your 
statement,  the  government  does  purchase 
it.  It  amounts  practically  to  a  purchase. 

"  Mr.  Bland  :  /  was  asking  as  to  laws 
and  not  as  to  opinions,  or  as  to  policies,  or 
discretionary  powers" 


174        Money,  Silver,  and  Finance.. 

It  wou]d  never  do  for  Mr.  Bland  or  Sen- 
ator Stewart  to  admit  that  free-coinage  of 
silver  is  equivalent  to  unlimited  purchase 
of  silver  at  $1.2929  per  ounce,  for  Ameri- 
can common-sense  would  oppose  the  pur 
chasing  of  anything  at  thirty  per  cent,  above 
its  market  value,  but  nevertheless  the  true 
meaning  of  free  coinage  will  eventually  be 
well  understood. 

1896.  It  is  much  better  understood  to-day,  and  of  course  the  ob- 
jection to  paying  about  ninety  per  cent,  above  market  value  is  stronger 
than  the  former  objection  to  paying  thirty  per  cent,  above  market 
Talue. 


CHAPTER   XL 


ULTIMATE    REDEMPTION." 


SENATOR  STEWART'S  argument  is  as  fol- 
lows : 

"  My  reason  for  asserting  that  there  is  not 
gold  enough  for  use  as  money  I  will  again 
repeat.  Statisticians  inform  us  that  in  1873 
there  were  nearly  $8,000,000,000  of  real 
money  of  ultimate  redemption,  certainly  over 
$7,000,000,000.  The  real  money  at  that 
time  which  required  no  promise  of  redemp- 
tion consisted  of  gold  and  silver  coin.  On 
the  gold  theory  there  is  now  less  than  one 
half  as  much  money  of  ultimate  redemp- 
tion as  there  was  eighteen  years  ago.  The 
Director  of  the  Mint  informs  us  that  there 
is  only  $3,727,000,000  of  gold  coin  in  the 
world,  which,  according  to  the  gold  advo- 
cates, is  all  the  real  money  which  now 
exists.  If  it  required  about  $8,000,000,000 
of  coin  as  a  basis  of  paper  circulation  and 
175 


1 7,6        Money,  Silver,  and  Finance. 

commercial  credits  eighteen  years  ago,  I 
contended  that  less  than  one  half  of  that 
amount  was  not  enough  to  sustain  the  pres- 
ent fabric  of  business  and  credit."1 

Redemption  how,  when,  where,  and  by 
whom  ? 

Is  the  real  money  in  the  world  to  be 
collected,  piled  up,  and  counted,  and  then 
doled  out  in  exchange  for  the  paper  substi- 
tutes of  all  kinds  which  now  pass  from 
hand  to  hand  and  from  country  to  country  ? 
Do  people  who  now  freely  give  valuable 
things  for  the  bits  of  paper  called  Treas- 
ury-notes, bank-notes,  checks,  drafts,  bills  of 
exchange,  etc.,  etc.,  do  so  with  the  mental 
reservation  :  This  is  all  right  for  the  pres- 
ent, but  some  day  all  these  bits  of  paper 
must  be  redeemed  in  gold,  or  at  least  in 
equal  parts  of  gold  and  silver?  Is  the 
time  of  "ultimate  redemption"  fixed  for 
this  year  or  next,  or  for  some  other  year  ? 
Is  the  place  of  redemption  London,  New 
York,  Hong  Kong,  or  is  this  point  not  yet 
agreed  upon  ?  Is  the  duty  of  seeing  that 
every  owner  of  paper  shall  be  given  the 

1  New  York  Evening  Telegram,  1891. 


"  Ultimate  Redemption"  177 

sum  of  money  named  on  the  face  of  the 
paper,  a  duty  for  our  government  or  for 
some  other  government  to  perform,  o?*  shall 
redemption  be  performed  by  a  congress  of 
the  world's  financiers,  representing  the  vari- 
ous nations  in  proportion  to  the  sum  of 
paper  held  by  the  traders  of  each  country  ? 
And  if  the  manner,  the  time,  the  place,  the 
manager  of  "  ultimate  redemption  "  can  not 
be  named,  then  what  folly  it  is  to  talk  of 
"  ultimate  redemption  "  ! 

Actual  redemption,  however,  there  is  all 
the  time  and  everywhere  and  by  everybody 
who  continues  solvent.  Continuous  re- 
demption is  familiar  to  all  business  men ; 
"  ultimate  redemption  "  is  a  mere  theory. 
A  gives  a  check  to  B  for  $1,000,  and  he 
deposits  it  in  bank ;  B  gives  a  check  to  C 
for  $1,000  and  this  check  is  deposited  in 
another  bank ;  C  gives  a  similar  check  to 
D  and  this  goes  into  still  another  bank; 
D  gives  two  checks  for  $500  each  to  E 
and  F,  who  deposit,  respectively,  in  two 
more  banks ;  E  draws  checks  aggregating 
only  $400 — say  $300  in  A's  favor  and 
$100  in  B's  favor;  F  draws  checks  for 


1 78        Money >  Silver,  and  Finance. 


in  C's  favor,  and  $100  in  D's  favor. 
The  next  day  all  of  the  checks  come  to- 
gether at  the  Clearing  House,  and  all  of 
the  transactions  which  gave  rise  to  the 
drawing  and  depositing  of  all  of  the 
checks  are  settled  by  the  payment  into  the 
Clearing  House  of  $700  by  A's  bank,  and 
by  the  receipt  from  the  Clearing  House  of 
$100  by  B's  bank,  $100  by  C's  bank, 
$100  by  D's  bank,  $100  by  E's  bank,  and 
$300  by  F's  bank.  All  of  the  transactions 
are  not  completely  settled,  of  course,  until 
each  bank  debits  and  credits  its  own  cus- 
tomer, in  accordance  with  the  checks  drawn 
and  deposited.  Now  this  is  a  fair  illustra- 
tion of  customary  redemption.  If  a  timid 
receiver  of  a  check  should  draw  the  money 
instead  of  depositing  the  check,  he  would 
take  a  step  toward  "  ultimate  redemption," 
but  if  after  that  he  should  deposit  the 
money  in  another  bank,  he  would  step 
back  again.  If  he  should  receive  paper 
money  from  his  bank,  have  this  money 
exchanged  for  gold,  and  then  hide  the 
gold,  there  would  be  a  case  of  "ultimate 
redemption."  "Ultimate  redemption,"  if 


"  Ultimate  Redemption!'  ijg 

it  mean  anything,  means  that  people  gen- 
erally are  going  to  behave  in  this  manner. 
In  time  of  panic  they  do  behave  somewhat 
in  this  way,  but  for  many  years  no  panic, 
in  any  great  and  civilized  commercial 
country,  has  been  sufficiently  severe  to 
lead  people  into  going  farther  than  one 
step  toward  "  ultimate  redemption  "•  —that 
is  to  say,  every  demand  for  money  has 
been  satisfied  with  paper  money,  not  a 
fraction -of -one -per- cent,  preference  being 
shown  for  gold.1 

The  illustration  of  Clearing-House  work, 
above  given,  shows  how  an  aggregate  of 
$4,600  in  transactions  may  be  settled  by 
the  use  of  $700  in  money,  but  the  real 
state  of  affairs  is  far  more  significant,  the 
New  York  Clearing-House,  during  the  year 
ending  October  1,  1891,  having  settled 
transactions  amounting  to  $34,053,698,7702 
by  a  transfer  of  balances  of  $1,584,635,- 
499,8this  being  less  than  one-twentieth  part 
of  the  greater  total.  Suppose  "ultimate 
redemption "  to  seize  the  inhabitants  of 
New  York  City,  the  average  bank  clearings 
amounting  to  $111,651,471  per  day,  and 

1  GoM  commanded  a  fractional  premium  iu  1895. 
«  Figures  for  1895  are,  $28.^64,379,1  JJ6. 
3  Figures  for  1895  are,  $1,896,574,349. 


1 80        Money,  Silver,  and  Finance. 

you  have  all  the  gold,  silver,  and  paper  in 
the  country  in  their  hands  in  about  a  fort- 
night !  True,  gold  and  silver  together 
would  last  more  days  than  would  gold 
alone,  but  the  difference  is  not  important. 

If  from  the  transactions  of  a  city  we  turn 
to  the  transactions  of  the  world,  this  moon- 
shine of  "ultimate  redemption"  becomes 
still  more  clear.  Theoretically  we  pay,  in 
gold,  for  whatever  we  buy  in  foreign 
countries :  practically,  we  send  out  of  the 
country  gold  to  the  extent  of  less  than  one 
tenth  of  the  sum  of  our  merchandise  im- 
ports. Theoretically,  we  receive  gold  for 
all  the  merchandise  that  goes  out  of  the 
country :  practically,  we  receive  gold  to  the 
extent  of  about  one  thirtieth  of  the  sum 
of  our  exports  of  merchandise.  And  if 
there  were  a  record  of  the  movements  of 
securities,  much  smaller  fractions  would 
have  to  be  used  to  show  the  relation  of 
gold  movements  to  the  sum  of  merchandise 
and  security  movements.  In  London,  the 
Qeanng  House  of  the  world,  our  exports 
are  set  off  against  our  imports,  and  every 
day  there  is  an  adjustment  of  differences,  a 


"  Ultimate  Redemption!'  181 

settlement  of  balances.  Other  commercial 
countries  are  always,  too,  adjusting  balances 
at  the  same  place.  Imagine  the  magnitude 
of  the  world's  volume  of  trade,  and  you  will 
see  that  $8,000,000,000  of  "  real  money" 
for  such  a  purpose  as  "ultimate  redemp- 
tion "  would  go  but  little  farther  than 
$3,727,000,000  of  gold.  Neither  sum  would 
do,  and  certainly  that  portion  of  either  sum 
which  the  power  of  all  trading  nations, 
using  all  their  forces,  could  collect  for  the 
purpose  of  "ultimate  redemption"  at  any 
place  or  at  any  time  would  be  insignificant 
when  compared  to  the  volume  of  business 
to  be  settled. 

We  must  look  upon  redemption  in  prac- 
tice not  as  it  may  be  in  dreams.  Every 
day  in  the  year,  paper  promises  are  being 
redeemed  and  new  paper  promises  are  being 
issued,  and  continuous  redemption  and  con- 
tinuous issue  will  go  on,  keeping  pace  with 
each  other,  everybody  taking  part  as  he  can 
or  as  he  sees  fit.  The  sum  of  money  in  use 
in  the  world  fairly  well  suits  the  business 
needs  of  the  world,  in  the  practical  conduct 
of  such  business,  the  redemption  that  goes 


1 82        Money,  Silver,  and  Finance. 

on  all  the  time  being  the  only  possible  kind 
of  redemption.  And  if  the  world  use  less 
silver  for  the  purpose  than  it  should  use, 
in  order  to  comply  with  the  Senator's  views, 
that  is  the  fault  of  silver  or  the  fault  of  the 
Senator's  views,  not  the  fault  of  the  world. 
People  sell  goods  for  checks,  drafts,  notes, 
etc.,  but  have  in  mind  the  using  of  their 
receipts  in  the  purchase  of  goods,  the  loan- 
ing of  capital,  or  in  the  making  of  invest- 
ments ;  to  hold  actual  money  or  to  keep  a 
large  sum  credited  at  the  bank  meaning  to 
lose  interest.  Assisted  by  financial  facili- 
ties, always  growing,  extending,  and  im- 
proving, the  world's  trade  and  commerce 
have  gone  on  increasing  and  expanding, 
and  on  the  whole  the  world  is  doing  fairly 
well,  and  nobody  need  be  troubled  long  by 
the  theory  of  "  ultimate  redemption." 

NOTE.— Of  late  years  there  has  been  economical  progress  even  in 
the  matter  of  bank  credits  or  balances  in  bank.  Clearing-house  sys- 
tems have  been  so  extended  that  many  transactions  in  stocks  and 
merchandise  which  used  to  call  for  separate  settlements  are  now 
nearly  offset  by  each  other,  checks  being  needed  only  for  resultant 
differences. 


CHAPTER  XII. 

THE  OLD  VOLUME-OF-MONEY  THEORY. 

THE  theory  that  variations  in  prices  and 
in  industrial  activities  are  due  often  or 
generally  to  variations  in  the  volume  of 
money,  is  so  persistent  that  the  hourly, 
daily,  weekly,  and  yearly  denial  of  this 
theory  by  the  movements  of  prices,  on  the 
floor  of  every  commercial  or  stock  exchange 
in  the  world,  does  not  suffice  for  a  complete 
overthrow.  In  early  life,  we  notice  that 
the  more  money  we  have  the  more  things 
we  can  buy,  and  the  higher  the  prices 
which  we  can  afford  to  pay.  We  place 
money  and  things  in  two  opposing  posi- 
tions, money  struggling  to  advance  every- 
thing, while  everything  naturally  tries  to 
sink  to  a  low  level ;  and  so  when  prices 
move  upward  or  business  is  active  we  think 
that  the  supply  of  money  is  plentiful,  and 
when  prices  move  downward  or  business  is 
183 


1 84        Money,  Silver,  and  Finance. 

dull  we  say  that  money  is  scarce.  It  does 
not  appear  to  be  important  that  hardly 
ever  are  movements  in  prices  or  changes  in 
industrial  activity  accompanied  by  changes 
in  the  volume  of  money,  nor  does  it  affect 
the  life  of  this  old  theory  to  show  that  a 
downfall  in  prices  has  occurred  while  the 
volume  of  money  has  been  increasing ! 
The  theory  is  bred  in  our  bones  and  wall 
live  on  ! 

During  the  past  twenty  years  or  so  the 
prices  of  commodities  in  this  country  have 
fallen  to  the  extent  of  an  average  of  about 
thirty  per  cent.,  and  business  has  been  alter- 
nately slow  and  brisk,  and  brisk  and  slow, 
but,  concurrent  with  this  decline  in  prices 
and  this  undulatory  movement  of  trade, 
there  has  been  an  increase  in  the  volume 
of  money,  in  circulation,  to  the  extent  of 
about  ninety-four  per  cent.,  being  an  in- 
crease, per  capita  of  population,  of  about 
twenty  per  cent.,  as  shown  by  the  follow- 
ing tables  furnished  by  the  Director  of  the 
Mint,  Mr.  H.  O.  Leech,  to  the  Committee 
of  the  House  on  Coinage,  Weights,  and 
Measures,  1891, 


The  Old  Volumc-of- Money  Theory.    185 

"  The  following  tables  [page  186]  exhibit 
the  comparative  amounts  of  the  various 
kinds  of  money  in  actual  circulation  at  dif- 
ferent periods.  The  various  sums  stated  in 
the  tables  are  all  exclusive  of  money  in  the 
Treasury.  They  represent,  as  nearly  as  is 
possible,  the  exact  amounts  of  the  several 
kinds  of  money  in  actual  circulation  among 
the  people  at  the  periods  named." 

Accompanying  the  increase  in  volume  of 
money  and  in  sum  per  capita,  and  empha- 
sizing the  truth  that  money  has  not  been 
really  scarce,  there  have  been  a  fall  in  the 
average  rate  of  interest,  an  advance  in  the 
average  rate  of  wages,  an  advance  in  rents, 
and  an  advance  in  the  price  of  real  estate. 
But  in  spite  of  all  this  the  silver  advocate 
points  to  the  fall  in  the  price  of  silver  bul- 
lion, talks  of  the  "demonetization  "  of  1873, 
and  reiterates  the  exploded  volume-of- 
money  theory,  without  stopping  to  con- 
sider that  we  now  have  a  greater  volume 
of  money  and  more  money,  per  capita,  than 
ever  before  in  the  history  of  this  country. 

The  erroneous  notions  of  our  day  are 
similar  to  those  which  prevailed  in  the  first 


1 86        Money,  Silver,  and  Finance. 


•s 

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Gold  coin 
Standard  silver  dollars 
Subsidiary  silver  and  £r« 
Gold  certificates 
Silver  certificates  . 
Treasury  notes,  Act  Jul 
United  States  notes 
National  bank  notes 

o 
H 

Net  increase 
Circulation  per  capita  in 

TABLE  No.  2.  —  Compar 

Gold  coin 
Standard  silver  dollars  . 
Subsidiary  silver  . 
Gold  certificates 
Silver  certificates  . 
Treasury  notes,  Act  Ju 
United  States  notes 
National  bank  notes 

"rt 
0 

r-1 

Net  increase 
Circulation  per  capita  in 

The  Old  Volume -of -Money  Theory.   187 

half  of  the  century,  and  which  Thomas 
Tooke  refuted  by  a  life-long  record  of  price- 
variations.  He  proved  that  prices  obey 
natural  laws  and  only  follow  monetary 
changes  in  exceptional  cases,  prices  often 
moving,  indeed,  in  the  direction  contrary 
to  that  which  known  monetary  changes 
would  indicate.  Mr.  Tooke's  work  is  now 
so  rare  that  I  think  it  not  out  of  place  to 
quote  from  him,  in  order  to  show  how  closely 
the  logic  of  a  half-century  ago,  in  -England, 
fits  the  circumstances  of  the  present  time, 
in  America.  Mr.  Tooke's  History  of  Prices 
covers  the  period  from  1793  to  1856.  I 
quote  from  vol.  ii.,  p  267  : 

"  But  whenever  a  fall  of  prices  since  1819 
has  taken  place,  if  there  happens  to  have 
been  coincidentally  any  actual  or  supposed 
reduction  of  the  amount  of  the  circulation, 
such  is  the  prevalence  of  the  currency 
theory,  that  the  proceedings  of  the  Bank 
(Bank  of  England)  are  usually  referred  to 
as  the  moving  cause  of  the  alteration  of 
prices.  Thus  the  money  crisis,  as  it  is 
called,  of  the  latter  part  of  18361  is,  in 

1  Foreshadowing  our  panic  of  1837. 


1 88        Money,  Silver,  and  Finance. 

most  of  the  circulars  of  that  period,  as- 
sumed to  have  been  the  cause  of  the  fall  of 
prices  iu  those  instances  in  which  a  fall 
did  occur,  while  in  the  instances  of  the 
large  classes  of  articles  which  experienced 
either  no  fall,  or  none  worth  mentioning, 
and  some  indeed  of  the  most  important  of 
which  had  coincidentally  risen  in  price,  the 
more  peculiar  circumstances  affecting  them 
are  held  to  be  sufficient  to  account  for  their 
not  coming  under  the  influence  of  the 
currency. 

"  There  was,  in  fact,  nothing  like  an  ex- 
treme general  depression  of  prices  during 
the  severest  pressure  of  the  money  market, 
before  the  end  of  November,  1836.  The 
greatest  fall  that  occurred  in  that  year  \vas 
in  the  article  of  tea.  But  it  is  well  known 
that  the  importation  was  on  a  scale  of  un- 
precedented magnitude. 

"The  following  articles,  embracing  the 
largest  amount  of  value,  experienced  no 
fall,  and  the  greater  proportion  actually  rose, 
in  price  coincidentally  with  the  pressure  on 
the  money  market  till  the  close  of  1836. 

"  Corn,  meat,  butter,  Irish  provisions  and 


The  Old  Volume-of- Money  Theory.   189 

bacon,  oil,  tallow,  hemp,  iron,  copper,  dye- 
woods,  rum,  besides  many  minor  articles, 
were  as  high  in  November,  1836,  as  in  the 
spring  of  that  year,  and  the  greater  part  of 
them  higher.  And,  inasmuch  as  those  that 
had  fallen  were  in  no  degree  more  depressed 
than  the  difference  of  actual  or  approaching 
fresh  supplies  warranted,  the  inference  that 
such  fall  was  directly  caused  by  the  state 
of  the  money  market  in  the  summer  and 
autumn  of  1836  is  not  legitimately  drawn. 
"  So  prevalent  is  the  theory  of  the  para- 
mount influence  of  the  currency,  that  most 
of  the  writers  of  commercial  price-currents 
and  circulars  are  infected  by  it."  Mr. 
Tooke  copies  one  of  the  price-currents,  pub- 
lished at  the  close  of  1836,  reviewing  the 
commercial  transactions  of  the  year,  and 
showing  the  writer  to  be  fully  imbued  with 
the  currency,  or  volurne-of-money,  theory. 
Then,  says  Mr.  Tooke:  "The  whimsical 
part  is  that,  in  giving  a  succinct  account  of 
the  variations  of  each  of  the  articles,  the 
decline  of  those  which  fell  in  price  after 
the  spring  and  summer  of  1836  is  rationally 
explained  by  circumstances  quite  indepen- 


1 90        Money,  Silver,  and  Finance. 

dent  of  the  state  of  the  money  market" 
Concluding  his  remarks  upon  this  fair 
specimen  of  price-currents  of  those  days, 
Mr.  Tooke  adds :  "  The  reasoning;  here  is 

o 

exactly  that  of  the  currency  doctrine ;  the 
articles  that  fell  in  price  are  supposed  to 
have  been  exclusively  under  the  influence 
of  the  contraction  of  the  Bank  issues,  which, 
by  the  way,  had  not  then  been  contracted 
in  any  degree  worth  mentioning  ;  while 
those  articles  that  had  not  fallen,  or  were 
rising,  are  stated  to  have  been  under  the 
influence  of  local  or  peculiar  circumstances." 
In  Mr.  Tooke's  time  a  contraction  of  the 
Bank  issues,  whether  the  contraction  had 
actually  happened  or  not,  was  charged  with 
putting  down  the  prices  of  some  commodi- 
ties, such  commodities,  for  instance,  as  had 
declined  in  price  because  of  over-supply ; 
and  the  supposed  contraction  was  supposed 
to  have  had  no  effect  upon  the  prices  of 
those  articles  which  had  not  declined  in 
price.  In  our  time  "  Demonetization,"  al- 
though there  has  been  no  demonetization, 

o  ' 

and  contraction  of  the  volume  of  money, 
although  there  has  been  no  contraction,  are 


The  Old  Volume -of -Money   Theory.    191 

charged  with  putting  down  the  prices  of 
commodities,  and  no  importance  is  attached 
to  the  circumstances  that  interest  has  de- 
clined, that  real  estate  has  advanced,  and 
that  wages  have  gone  up — no  importance 
whatever  to  the  most  important  of  all  con- 
siderations :  the  reduction  in  the  prices 
of  most  commodities  and  the  advance  in 
wages,  together,  have  placed  the  major 
portion  of  our  population  in  a  better  posi- 
tion than  ever  before  attained. 

No  more  consistent  are  these  volume-of- 
rnoney  theorists  when  they  cite  France  as  an 
example  of  a  country  which  has  a  proper 
volume  of  money.  Did  the  having  of  forty- 
four  dollars  per  capita  lead  the  people  of 
France  into  the  attempt  to  control  the  cop- 
per output  of  the  world,  or  into  the  attempt 
to  dig  the  Panama  Canal,  and  is  the  loss 
of  hundreds  of  millions  in  these  ways  the 
proof  that  it  is  better  to  have  forty-four 
dollars  per  capita  than  to  have,  as  we  do, 
only  twenty -four  dollars^/'  capita?1  And 

1  The  report  of  the  Secretary  of  the  Treasury,  Mr.  Carlisle,  1895, 
estimates  a  decrease  in  circulation  between  Nov.  1,  1894,  and  Nov.  1, 
1895,  from  $1,672,093,422  to  $1,598,859,316,  or,  say,  $24.27  per  capita  to 
$22.72  per  capita. 


192        Money,  Silver,  and  Finance. 

if  we  are  able  to  go  into  "  wild-cat "  specu- 
lations upon  a  capital  of  only  twenty-four 
dollars  a  head,  our  ventures  being  often 
"wilder  "  than  French  ventures,  wThat  right 
have  we  to  envy  the  French  ?  At  least  it 
is  incumbent  upon  these  theorists  to  show 
that  business  is  more  brisk  in  France  than 
it  is  in  America,  that  farmers  over  there 
find  it  easier  to  get  along,  that  wages  are 
higher,  etc.,  etc.,  for  if  all  this  cannot  be 
shown — and  everybody  knows  that  it  can- 
not,— then  it  naturally  follows  that,  in  this 
respect,  the  currency  theory  fails.  As  a 
matter  of  fact,  does  it  not  appear  that  the 
people  of  France  use  forty-four  dollars 
each  without  deriving  any  benefit  from  so 
excessive  use  of  money  ?  By  the  ordinary 
standards,  I  should  say  that  the  people  of 
France  are  worse  off  than  the  people  of 
America,  and  in  spite  of  the  truth  that 
Frenchmen  have,  individually,  say  about 
twice  as  much  money  as  we  have. 
There  is  here  no  paradox  though,  unless  we 
forget  that  wealth  and  money  are  not  sy- 
nonymous. Different  nations  use  different 
volumes  of  money  and  different  sums  per 


The  Old  Volume -of -Money  Theory.   193 

capita,  somewhat  in  proportion  to  wealth 
possessed,  but  more  in  inverse  ratio  to  the 
development  of  banking  facilities  and  large- 
ly in  accordance  with  the  habits  of  the  peo- 
ple. The  amount  of  money  in  France  per 
capita  is  very  much  larger  than  it  is  in  the 
United  States,  but  no  person  would  say 
that  the  wealth  in  France  is  greater  per 
capita  than  in  the  United  States,  that  wages 
are  higher,  or  workmen  better  employed, 
or  that  business  over  there  is  more  active 
than  it  is  here.  Frenchmen  keep  money  in 
old  stockings;  we  put  it  in  banks.  The 
banking  system  of  France  is  in  a  compara- 
tively simple  state,1  ours  is  highly  devel- 
oped. The  u silverites'r  just  cause  for 
complaint,  therefore,  if  they  have  any  just 
cause  for  complaint,  is  against  the  Ameri- 
can people  for  their  habit  of  parting  with 
money  as  soon  as  they  get  it.  If  we  could 
be  taught  to  carry  always  a  few  pounds  of 
silver  in  our  pockets  the  silver  in  use  in 
this  country  would  be  largely  increased. 
Or,  if  we  could  be  shown  the  advantage  of 

1    The  Theory  and  History  of  Banking,  by  Charles  F.  Dun- 
bar.    Chapter  on  the  Bank  of  France. 
13 


194        Money,  Silver,  and  Finance. 

hiding  either  silver  or  its  paper  representa- 
tive under  the  floor  or  putting  it  anywhere 
but  in  bank,  where  it  immediately  be- 
gins to  do  about  ten  times  the  amount  of 
work  naturally  expected  of  it,  the  circulat- 
ing medium  would  have  to  be  much  largei 
than  it  is.  The  "silverites"  should  find 
fault  also  with  the  people  of  Great 'Britain, 
as  their  habit  of  banking  their  money  in- 
stead of  hoarding  or  handling  it,  is  quite  as 
objectionable  (?)  as  our  own ;  Englishmen 
leaving  to  take  care  of  itself  to  a  great  ex- 
tent the  need  of  an  increased  supply  of 
money  to  match  the  increase  in  wealth, 
in  business,  or  even  in  population.1 

A  great  deal  of  money  may  circulate  in 
a  country  without  producing  any  of  the 
results  which  theorists  of  the  currency  type 
would  expect — good  business,  low  interest, 
high  prices,  high  wages,  etc.  Business 
may  be  unsatisfactory  or  the  reverse,  the 
rates  of  interest  at  financial  centres  may 
vary  between  one  per  cent,  a  day  and  one 
per  cent,  a  year,  prices  and  wages  or  either 
of  them  may  be  high  or  low,  and  we  can 

'  The  circulation  of  money  in  the  United  Kingdom,  notwith- 
standing the  immeasurable  greatness  of  the  volume  of  business 
transactions,  is  equivalent  only  to  about  $i8.6o/<v  cap. 


The  Old  Volume-of -Money  Theory.    195 

assert  that  within  reasonable  limits  any 
state  of  affairs  may  exist  coincidentally 
with  a  large  or  a  small  volume  of  money.  In 
truth,  this  country  has  experienced  many 
conditions  of  trade  during  the  past  decade 
or  two,  while  the  volume  of  money  has 
been  advancing. 

It  is  argued  that  money  is  the  base  of 
credit,  and  therefore  the  more  money  we 
have  in  circulation  the  greater  can  be  the 
expansion  of  credit ;  on  the  contrary,  how- 
ever, wealth  in  general  is  the  actual  base  of 
credit,  and  money  is  only  a  small  portion  of 
the  total  sum  of  wealth.  Excepting  in  time 
of  panic  no  one  thinks  of  handling  money  in 
a  large  way.  No  prices  are  higher  for  cash 
than  for  check.  Nobody  refuses  credit  to  a 
customer  because  that  customer  has  stocks, 
bonds,  merchandise,  real  estate,  instead  of 
money  in  his  pockets.  Nearly  all  the  time 
prices  move  up  and  down  for  causes  which 
directly  affect  commodities,  individually  or 
in  groups. 

In  time  of  panic  there  is  always  an  ap- 
pearance of  a  scarcity  of  money,  due  to  the 
circumstance  that  for  a  short  time  money 
is  compelled  to  do  a  great  deal  of  the  work 


196        Money,  Silver,  and  Finance. 

which  ordinarily  is  done  by  credit.  Money 
is  unsuitable  for  about  nine  tenths  of  the 
work  of  modern  business,  and  if  there  were 
twice  as  much  money  in  circulation  the 
character  of  money  would  not  be  changed. 
The  work  must  be  done  by  credit  or  the 
volume  of  exchanges  be  enormously  re- 
duced. Usually,  therefore,  the  remedy  for 
a  panic  is  not  the  issuing  of  new  money 
but  the  doing  of  something  to  restore  confi- 
dence, which  remedy  may  be,  or  may  not 
be,  the  issuing  of  new  money.  In  the 
panic  of  1 890,1  the  banks  of  New  York  set- 
tled many  of  their  daily  claims  upon  each 
other  by  using  Clearing-House  certificates, 
instead  of  money,  and  thus  bridged  over 
the  time  when  money  appeared  to  be  scarce, 
or  the  time  when  money  was  forced  to  do 
more  work  than  it  ought  to  do.  A  tempo- 
rary form  of  credit  was  adopted ;  and  this 
served  also  as  an  example  to  business  men, 
the  restoration  of  the  use  of  credit  anionsj 

o 

them  being  the  proper  way  to  bring  busi 
ness  back  into  the  only  channel  which  can 
hold  it.     No  student  of  human  nature  and 
of  the  history  of  finance  will  think  that 

»  Also  in  1893. 


The  Old  Volume -of -Money  Theory.   197 

panics  or  periods  of  business  depression 
can  be  prevented ;  or  that  panics  and  peri- 
ods of  depression  cannot  occur  or  have  not 
occurred  under  any  monetary  system,  or  in 
any  country  using  any  volume  of  money. 
A  panic  may  be  the  natural  culmination  of 
a  trade  movement,  and  generally  a  panic 
does  not  mean  that  more  money  is  needed 
in  circulation,  for,  after  a  panic,  money 
usually  becomes  apparently  over- plentiful. 
A  temporary  expedient  is,  I  think,  the 
proper  remedy  for  a  panic,  although  when- 
ever a  panic  occurs  there  is  sure  to  be 
heard  the  money-scarcity  complaint. 

Temporary  substitutes  for  money  (such 
as  Clearing-House  certificates)  have  this 
advantage  over  real  money :  When  money 
becomes  over-plentiful,  after  a  panic,  these 
substitutes  may  be  quickly  cancelled, 
whereas  real  money  would  remain  in  circu- 
lation and  would  tend  to  make  gold  leave 
the  country. 

Abandoning  the  volurne-of-money  theory, 
we  necessarily  give  up  using  the  rate  of 
wages,  the  average  of  prices,  the  rate  of 
interest,  and  the  state  of  trade  as  perfect  tests 


1 98         Money,  Silver,  and  Finance. 

of  the  volume  of  money  in  circulation,  as 
to  whether  the  volume  be  at  any  particu- 
lar time  too  large  or  too  small ;  but,  how- 
ever erratic  have  been  the  movements  of 
trade,  of  prices,  and  of  the  rate  of  interest 
during  the  past  twenty  years,  while  the 
volume  of  money  has  been  advancing,  still 
the  average  of  prices,  the  rate  of  interest, 
the  rate  of  wages,  and  the  state  of  trade 
must  be  taken  into  consideration,  with  all 
facts  and  circumstances,  if  we  are  to  ascer- 
tain what  volume  of  money  is  be,st  suited 
to  us.  A  good  step  in  the  right  direction, 
I  think,  is  the  striking  out,  as  irrelevant, 
the  fact  that  Frenchmen  use  the  equivalent 
of  $44  dollars  each ;  and  with  this  fact, 
another,  that  the  East  can  get  along  with 
about  $4  per  capita,  for  we  have  to  do 
with  American  conditions  only. 

Now,  what  tests  have  we  ?  One  coun- 
try uses  the  equivalent  of  %^per  capita, 
another  say  $4  per  capita,  others  any 
sum  between ;  but  no  country  is  a  propel 
example  for  us.  And  if  we  take  our 
own  experience  only,  we  find  that  within 
ten  or  twenty  years,  judging  by  all  the 


The  Old 'Volume -of -Money  Theory.    199 

tests  I  "have  named,  we  must  have  used  at 
times  twice  or  thrice  as  much  money  as 
we  ought  to  use,  and  at  other  times  only 
a  small  fraction  of  the  sum  which  we 
ought  to  have  used ;  but,  of  course,  we 
are  forced  to  these  absurd  conclusions  by 
our  failure  to  constantly  bear  in  mind  the 
naturalness  of  the  undulatory  character  of 
trade,  price,  wage,  and  interest  movements. 
If,  however,  we  look  upon  these  move- 
ments as  necessarily  undulatory  (see  ex- 
planation in  Chapter  II.),  and  then  bring 
another  element  into  consideration,  the  rate 
of  foreign  exchange,  we  shall  have  a  fair 
chance  to  ascertain,  approximately,  what  vol- 
ume of  money  is  best  suited  to  the  interests 
of  this  country. 

Fortunately,  there  is  no  need  for  trying 
to  construct  a  pure  theory.  We  can  as- 
sume that  our  habits  and  our  business 
methods  are  correct,  and  that  the  volume 
of  money  which  we  actually  use  is  some^ 
where  near  the  proper  volume ;  but  this 
means  nothing  in  regard  to  the  quality 
of  the  money  and  to  the  proportion  of  eact 
kind  to  the  other  kinds,  for  arbitrary  laws. 


2OO        Money,  Silver,  and  Finance. 

rather  than  natural  development,  have  de- 
termined quality  and  proportion.  And 
while,  therefore,  it  is  hard  to  say  whether 
all  the  interests  of  this  country  could  be 
better  served  by  a  smaller  or  by  a  larger 
volume  of  money,  it  need  not  be  at  all  dif- 
ficult to  show  that  the  interests  of  this 
country  would  be  better  served  by  a  bet- 
ter quality  of  money.  I  think  it  perfectly 
clear  indeed,  that  if  we  had  had  different 
currency  or  coinage  laws,  we  might  easily 
have  accumulated  gold  instead  of  a  large 
portion  of  the  silver  which  we  have  ac- 
cumulated. In  other  words,  if  our  legisla- 
tors had  paid  less  attention  to  the  demands 
of  "  silverites,"  of  cheap-money  demagogues, 
and  of  volume-of-money  theorists,  and  had 
given  due  study  to  the  subject  of  foreign 
exchange,  these  legislators  might  have  been 
able  to  see  the  wisdom  of  allowing  our 
production  of  gold  to  do  its  share  toward 
augmenting  our  total  circulation.  The  vol- 
;  tie  of  money  in  circulation  might  now  be 
as  great  as  it  is,  and  the  composition  of  the 
circulation  might  be  much  better  if  there 
had  been  in  our  currency  and  our  silver 


The  Old  Volume-of- Money  Theory.  201 

laws  provisions  for  the  suspension  of  silver 
purchases  and  the  suspension  of  the  issue 
of  paper  money,  whenever  gold  was  being 
exported.  If  it  be  the  duty  of  Congress  to 
provide  a  suitable  volume  of  money,  it  is 
no  less  a  duty  to  provide  as  good  money  as 
possible;  but,  on  the  contrary,  it  would 
seem  that  the  majority  had  conceived  their 
duties  to  be :  first,  take  care  of  our  silver- 
mining  industry  ;  secondly,  provide  plenty 
of  paper  money ;  thirdly,  supply  Ameri- 
can gold  to  the  rest  of  the  world. 

The  author  has  no  space  here  for  show- 
ing the  desirability  of  elasticity  in  the  vol- 
ume of  money ;  and,  he  has  not  wished  to 
belittle  the  importance  of  the  country's 
having  a  properly  large  volume  of  money. 
He  has  tried  to  show  the  importance  of 
the  proportion  of  our  kinds  of  money,  and 
to  bring  out  the  truth,  that  demands  for 
new  issues  of  money  are  generally  ill-found- 
ed ;  and,  certainly,  ought  to  go  unheeded 
whenever  compliance  with  such  demands 
must  result,  not  in  augmenting  the  volume 
of  money,  but  in  displacing  the  best  money 
by  inferior  money. 


CHAPTER  XIII. 

SUPPLEMENTAL. — A  RETROSPECT. — THE  PANIC  OF 
1893.  —  REVENUE  DEFICIENCY.  —  FINANCIAL 
FLOUNDERING. — BOND-ISSUING. — PAPER  MONEY 
REDUNDANCY.— THE  CIRCULATION.  — BI-METAL- 
LISM. — THE  FINANCIAL  SITUATION  IN  1896.— 
THE  ELECTION. — CONCLUSION. 

THE  original  concluding  chapter  of  this  work  was 
written  in  1802,  and  was  directed  particularly 
against  the  Silver  Purchase  Law.  The  objection- 
able clause  of  that  law  was  repealed  November  ], 
J893,  after  a  great  crisis  had  brought  home  to  the 
masses  of  our  people  the  vital  financial  question, 
and  had  taught  them  that  all  other  national  ques- 
tions were  comparatively  unimportant.  Given  a 
proper  revenue  for  the  Government,  the  question, 
for  instance,  whether  duties  should  be  raised  or 
should  be  lowered,  concerns  few  persons  directly  and 
material!  v;  but  financial  revulsion  may  shake  the 
great  industrial  structure  of  our  land  to  its  very 
foundations. 

How  far  the  business  of  the  country  has  retro- 
graded in  activity  since  the  panic  of  1893  may  be 


Revenue  Deficiency.  203 

shown  by  a  comparison  of  the  totals  of  bank 
clearings  for  the  United  States,  commencing  with 
the  period  of  three  months  just  before  the  panic, 
and  ending  with  the  first  quarter  of  1896: 

VOLUME  OF  BANK  CLEARINGS. 

1st  quarter,  1893 $15,647,000,000 

1894 10,377,000,000 

1895  11,165,000,000 

1896 12,117,000,000 

In  the  period,  1893-1896,  the  general  financial 
question  has  been  closely  connected  with  the  Gov- 
ernment revenue  question.  Of  course,  no  such 
decline  in  trade  as  that  indicated  by  the  decline  in 
volume  of  bank  clearings  could  take  place  without 
seriously  reducing  the  revenue  of  the  Government, 
for  wh'en  people  economize  they  do  not  discriminate 
in  favor  of  dutiable  goods.  Quite  naturally  the 
income  of  the  Government  fell  below  the  expendi- 
ture, and  in  spite  of  a  reduction  in  the  expenditure 
itself.  For  the  fiscal  year,  ending  June  30,  1893, 
the  income  of  the  Government  was  $2,341,000  in 
excess  of  the  expenditure;  but  ever  since  the  income 
has  been  deficient,  say,  by  169,803,000  for  the  year 
ending  June  30,  1894;  by  $42,805,000  for  the  year 
ending  June  30,  1895;  and  by  about  $26,000,000 
for  the  year  ending  June  30,  1896.  In  order  to 
avoid  a  consideration  here  of  the  effect  on  the 
revenue  of  tariff  changes,  I  will  add  that  the 
McKinley  Law  was  superseded  by  the  Wilson  Law 
on  August  28,  1894,  and  I  shall  gladly  permit  the 


204  Money,  Silver,  and  Finance. 

reader  to  charge  the  deficiency  to  legislative  action, 
to  the  decline  in  trade,  or  to  both,  my  necessity 
being  simply  to  call  attention  to  the  deficiency  and 
its  bearing  upon  governmental  finance. 

In  connection  with  these  figures  we  may  note 
that  for  two  years  they  seem  to  have  been  very  sur- 
prising to  the  Secretary  of  the  Treasury.  In  his 
annual  report,  dated  December  19,  1893,  he  fore- 
cast a  deficiency  for  the  fiscal  year,  then  current,  of 
$28,000,000,  which  proved  to  be  $41,800,000  below 
the  actual  deficiency.  On  December  3,  1894,  he 
made  a  better  guess  by  estimating  the  then  current 
year's  deficiency  at  only  $22,800,000  below  the 
figure  which  proved  to  be  the  real  deficiency.  On 
December  10,  1895,  however,  it  is  fair  to  add,  he 
more  closely  estimated  the  probable  deficiency  for 
the  current  fiscal  year  ending  June  30,  1896.  I 
suppose  that  the  Secretary's  miscalculations  are 
somewhat  responsible  for  the  financial  floundering 
of  the  Administration  in  1894  and  1895,  the  first 
two  sales  of  bonds  not  being  commensurate  with 
the  needs  of  the  Government  to  cover  revenue 
deficiency  and  to  provide  for  the  growing  demand 
for  gold  in  exchange  for  greenbacks,  this  demand 
increasing  with  the  growth  of  sentiment,  just  or 
unjust,  that  the  Administration  had  not  mastered 
the  situation. 

The  period  of  trade  depression  commenced  with 
what  was  called  a  "  Currency  Famine,"  the  sum- 
mer of  1893  being  distinguished  for  the  peculiar 


"  Currency  Famine."  205 

state  of  financial  affairs,  in  which  money  itself  was 
bought  and  sold,  payment  for  it  being  made  by 
checks  drawn  on  banks,  which  checks  were  not  cash- 
able, but  were  "  good  through  the  Clearing  House." 
If  you  had  a  balance  to  your  credit  in  a  bank,  that 
bank  would  certify  your  check,  and  with  it  you 
could  buy,  say,  96  per  cent,  to  99  per  cent,  as  much 
money.  It  was  a  time  of  almost  universal  bank 
suspension,  considered  technical  rather  than  real — 
a  period  when  necessity  overrode  law  and  custom. 
With  equal  disregard  of  law  and  custom,  there 
came  into  existence,  in  the  summer  of  1893,  many 
substitutes  for  money,  mainly  issued  by  employers 
of  labor  to  pay  off  their  hands,  these  substitutes 
being  good  at  local  stores  and  redeemable  by  the 
issuers  with  checks,  good  in  turn  through  the 
Clearing  House  or  aggregations  of  local  banks.1 

I  trust  that  no  reader  of  this  work  will  be  aston- 
ished to  learn  that  such  a  currency  famine  could 
possibly  occur  just  when  the  volume  of  circulation 
had  reached  its  highest  point,  for  it  should  be  clear 
that  no  volume  of  circulation,  however  large,  can 
satisfy  the  wants  of  trade  when  general  distrust 
causes  traders  to  ask  for  money  instead  of  checks, 
or  causes  even  a  small  portion  of  the  community  to 
hoard  money  rather  than  to  put  it  into  banks.  The 
Treasury  Eeport  for  April  1,  1893,  gives  the  fol- 
lowing figures  of  circulation,  which  may  be  com- 
pared with  those  of  earlier  dates  on  page  186: 

1  See  Hon.  John  De  Witt  Warner  in  Sound  Currency  for  Feb.  15, 
1895,  published  by  New  York  Reform  Club. 


206 


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Money,  Silver,  and  Finance. 


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Panic  of  1893.  20? 

The  circulating  medium  had  not  been  decreased 
in  volume,  but  the  amount  of  money  held  by 
banks  early  in  1893  was  down  to  the  "  apprehen- 
sion point/'  as  will  appear  by  comparing  the  figures 
below. 

Money  held  by  New  York  Clearing  House  Banks1 
on  or  about  April  1st: 

1892.  1893.  1894.  1895.  1896. 

$150,129,800.      $120,495,600.     $219,422,000.      $139,135,000.      $137.454,000. 

Money  held  by  New  York  Clearing  House  Banks 
in  excess  of  the  legally  required  25  per  cent,  re- 
serve : 

1892.  1893.  1894.  .  1895.  1896. 

$18,017,900.       $10,663,000.       $80,797,000.       $13,929,000.        $17,005,000. 

Trade  had  been  brisk  in  1892,  and  was  good  in 
1893,  until  employers  found  difficulty  in  obtaining 
money  with  which  to  cover  the  weekly  pay-roll. 
Immediately  some  employers  commenced  the  prac- 
tice of  keeping  money  in  strong-boxes,  to  have  it 
handy,  and  some  banks  avoided,  so  far  as  possible, 
the  paying  out  of  cash.  It  is  a  well-known  prin- 
ciple in  finance  that  depositors  leave  money  in 
banks  in  proportion  to  the  supposed  ease  with  which 
it  can  be  gotten  out.  In  1893,  depositors  became 
hoarders,  and  some  selfish  and  unpatriotic  receivers 
of  money  became  sellers  of  it  instead  of  depositors. 
Banks  of  deposit  were  soon  forced  to  curtail  the 
usual  loans  to  their  customers;  these,  in  turn,  were 

1  Nearly  seventy  banks  and  eighty  connected  institutions. 


208  Money,  Silver,  and  Finance. 

obliged  to  curtail  their  purchases  of  goods;  and  the 
manufacturers  of  goods  had  to  cut  down  the  pro- 
duction of  them,  and  to  discharge  the  men  who  were 
no  longer  needed.  The  surplus  reserve  of  the  banks 
disappeared,  and  on  August  12,  1893,  the  weekly 
report  of  the  New  York  Clearing  House  banks 
showed  that  they  held  $16,500,000  below  the  sum 
required  by  law,  the  total  sum  in  hand  being  only 
$76,500,000.  To  settle  balances  among  themselves, 
the  banks  used  Clearing  House  certificates,  issued 
by  the  association  against  securities,  and  thus 
economized  in  the  use  of  money  to  the  extent  of 
over  $41,000,000. 

Within  a  few  months  the  process  of  general 
liquidation  of  loans  and  general  checking  of  indus- 
trial enterprise  worked  ruin  to  thousands  of  busi- 
ness men  and  hardship  to  tens  of  thousands  of 
workmen.  In  due  course,  however,  the  lack  of  use 
for  money  brought  about  a  condition  of  money-glut 
instead  of  money-famine.  Not  only  were  the  Clear- 
ing House  certificates  promptly  canceled,  but  by 
February  1,  1894,  the  New  York  Clearing  House 
banks  found  themselves  in  possession  of  the  un- 
wieldly  sum  of  $249,500,000,  being  $111,600,000  in 
excess 'of  the  legally  required  reserve. 

In  the  summer  of  1893,  the  demand  for  money 
was  greater  for  paper  money,  because  of  conveni- 
ence in  handling,  than  for  gold  or  for  silver;  but  as 
soon  as  money  largely  accumulated  at  the  financial 
centres  of  the  country,  New  York  not  being  excep- 


Treasury  Embarrassment.  209 

tional,  an  alarming  preference  was  shown  for  gold, 
and  the  troubles  of  the  Treasury  grew  serious.  It 
is  true  that  some  preference  had  been  shown  for 
gold  over  other  money  ever  since  the  passage  of  the 
Silver  Purchase  Law,  the  Treasury's  receipts  of  gold 
certificates  in  July,  1890,  at  the  port  of  New  York,1 
being  95  per  cent,  of  the  total  receipts,  and  there- 
after diminishing  until  May,  1893,  when  no  gold 
certificates  at  all  were  paid  into  the  Treasury.  In 
July,  1890,  the  gold  in  the  Treasury,  not  repre- 
sented by  outstanding  certificates,  amounted  to 
$184,000,000;  but  by  April,  1893,  this  free  gold 
had  fallen  for  the  first  time  below  $100,000,000, 
the  generally  accepted  danger  line.  The  Treasury 
continued  to  lose,  and  in  January,  1894,  its  free 
gold,  amounting  to  only  $69,700,000,  it  was  found 
necessary  to  adopt  a  new  policy — that  of  bond- 
issuing — for  the  purpose  of  obtaining  gold  with 
which  to  continue  paper-money  redeeming.  Ac- 
cordingly, $50,000,000  five  per  cent,  ten-year  bonds 
were  sold  for  $58,060,917,  and  gold  payments  being 
exacted  for  the  bonds,  the  Treasury's  holding  was 
put  above  the  $100,000,000  line,  but  was  found  to 
be  in  March,  1894,  after  the  bonds  had  been  paid 
for, -only  $107.446,000,  some  gold  having  gone  out 
even  while  the  bulk  was  coming  in.  In  about  five 
months  this  free  gold  dwindled  to  $52,189,000, 
from  which  sum  it  was  built  up  to  $61,878,000,  the 

1  More  than  two  thirds  of  the  government  customs  are  received 
at  New  York. 


210  Money,  Silver,  and  Finance. 

banks  exchanging  gold  for  paper  and  showing  the 
same  public  spirit  which  they  had  displayed  in 
parting  with  gold  for  the  $50,000,000  bonds  not 
wanted  at  the  time  and  on  the  Treasury's  terms. 
In  November,  1894,  the  Treasury  had  to  be  helped 
again,  and  again  $50,000,000  five  per  cent,  ten- 
year  bonds  were  sold,  the  yield  this  time  being  $58,- 
538,500  gold.  This  gold,  and  more,  immediately 
flew  out  of  the  Treasury,  and  in  February,  1895,  its 
reserve  was  down  to  $41,340,000,  and  several  mill- 
ions of  this  was  demanded.  The  bankruptcy  of  the 
Treasury,  its  failure  to  continue  the  paper  redeem- 
ing, which  was  commenced  in  1879,  seemed  immi- 
nent. Popular  hoarding  of  gold  had  increased  with 
the  growth  of  distrust  in  the  Government's  ability 
to  maintain  gold  payments.  There  was  hoarding, 
too,  because  those  who  wished  to  buy  of  the  then 
foreseen  issue  of  bonds  had  to  have  gold  with  which 
to  pay  for  them,  the  Government  taking  only  gold 
in  payment. 

In  this  emergency  new  features  were  introduced 
— that  of  issuing  bonds  for  gold  coin,  or  ounces  of 
gold — 3,500,000  ounces — not  less  than  half  of  the 
gold  to  be  obtained  abroad,  and  the  bankers,  enter- 
ing into  this  contract,  agreeing  also  to  exert  their 
influence  to  protect  the  Treasury  from  withdrawals 
of  gold.  Humiliating  to  this  country  of  boundless 
resources  as  was  this  stipulation  for  protection,  this 
issue  of  bonds  was  more  satisfactory  than  the  two 
preceding  issues,  for  people  had  confidence  in  the 


Third  Bond- Sale.  211 

ability  of  the  bankers.  Gold  hoarding  and  gold 
exporting  were  both  checked.  Carrying  out  the 
terms  of  this  bond  contract,  $62,315,400  four 
per  cent,  thirty-year  bonds  were  issued  for  $65,- 
116,244  gold;  and  the  bankers,  after  complet- 
ing the  contract,  gave  to  the  Treasury  $16,- 
127,432  gold  in  exchange  for  paper  money,  the 
Treasury  not  being  left  to  its  own  devices  until  the 
autumn  of  1895.  As  late  as  December  10,  1895,  the 
Secretary  of  the  Treasury,  in  his  annual  report, 
wrote  most  enthusiastically  of  the  results  of  tliLs 
third  bond  sale: 

"Confidence  in  our  securities  as  safe  and  profit- 
able investments  was  at  once  restored  to  such  an 
extent  that  they  ceased  to  be  returned  to  our  mar- 
ket for  sale,  and  a  very  considerable  demand  for 
them  was  created  abroad;  but  the  most  gratifying 
evidences  of  improvement  in  our  condition  were 
afforded  by  the  prompt  revival  of  business  among 
our  own  people,  the  increased  activity  and  extension 
of  our  domestic  industrial  and  commercial  opera- 
tions, the  rise  in  the  prices  of  our  principal  agricul- 
tural products,  and  the  general  feeling  of  relief 
and  security  which  became  apparent  in  every  part 
of  the  country.  These  encouraging  indications  of 
increasing  prosperity  still  continue,"  etc.,  etc. 

Alas!  The  Venezulean  Message  of  the  President 
and  its  hasty  endorsement  by  Congress  were  not  in 
sight.  As  lightning  from  a  clear  sky,  this  war- 
like document  struck  the  industrial  and  financial 


212  Money,  Silver,  and  Finance. 

world  just  one  week  later.  Confidence  vanished; 
American  securities  were  sent  home  for  sale;  the 
foreign  demand  for  "  Americans "  disappeared; 
business  activity  gave  way  to  stagnation,  and  enter- 
prise to  extreme  timidity;  prices  fell;  the  loaning 
of  money  nearly  ceased,  for  the  rate  on  call  loans 
was  advanced  to  80  per  cent,  per  annum;1  gold  was 
hoarded,  and  gold  was  exported;  and  the  New  York 
Clearing  House  Association,  to  keep  the  panic 
within  bounds,  authorized  its  Loan  Committee  to 
assist  such  of  the  Association  banks  as  might  ask 
assistance.  None  of  them  happened  to  be  in  con- 
dition to  need  it,  but  the  assurance  that  no  well- 
managed  bank  would  be  permitted  to  fail  was  wel- 
come to  the  community.  The  banks  generally 
exercised  great  caution  in  lending  money,  and  so 
their  surplus  reserve  was  not  allowed  to  fall  below 
$15,939,000,  the  figure  reached  on  December  28,  '95. 

On  the  other  hand,  the  free  gold  in  the  Treasury 
continued  to  diminish,  and  five  or  six  weeks  later  it 
was  down  to  $44,563,000.  During  the  same  period 
the  New  York  banks  had  added  to  their  money 
surplus  reserve,  and  it  had  grown  to  $40,182,000. 

At  the  turn  of  the  year,  bankers  were  ready  to 
take  the  fourth  issue  of  bonds,  for  some  time  seen 
to  be  inevitable.  Two  hundred  millions  of  dollars 
in  gold  could  have  been  obtained  by  the  Govern- 
ment, but  not  without  a  profit  to  the  bankers,  on 

1  The  New  York  State  USUBJ  Law  does  not  cover  large  call 
loans  secured  by  collateral. 


Tlie  Popular  Loan.  213 

re-sale  or  distribution  of  the  bonds.  The  differ- 
ence, however,  between  the  sum  which  the  Govern- 
ment would  get  and  the  sum  which  the  bankers 
would  receive,  supposing  that  they  could  market 
the  bonds  at  or  near  current  quotations,  was  so 
great  that  popular  clamor  pi-evented  a  fourth  issue 
of  bonds  on  the  basis  of  the  third  issue.  The  cost 
of  protecting  the  Treasury  and  of  keeping  the  rate 
of  foreign  exchange  below  the  gold-exporting  point 
and  the  risks  involved  were  not  appreciated  by  the 
public. 

A  popular  loan  was  determined  upon,  and  on 
January  6,  1896,  the  Government  asked  for  bids  for 
bonds  to  the  extent  of  $100,000,000,  having  thirty 
years  to  run  from  1895,  bearing  interest  at  the  rate 
of  four  per  cent,  per  annum,  gold  coin  receivable  in 
payment,  and  the  bids  to  be  opened  thirty  days 
later.  Although  the  public  had  not  wanted  the 
first  issue  of  bonds,  it  was  found  on  opening  the 
bids  for  this  fourth  issue  that  no  less  than  $568,- 
269,000  bonds  were  now  wanted,  nearly  4,700  sepa- 
rate bids  having  been  filed,  and  at  prices  ranging 
upward  to  119.32.  The  $100,000,000  bonds  were 
awarded  to  the  highest  bidders,  the  yield  of  gold 
Doing  $111,378,836.  A  portion  of  this  sum  was 
deposited  in  the  Treasury  before  the  bids  were 
opened,  and  as  soon  as  the  loan  was  seen  to  be  suc- 
cessful, a  new  era  of  prosperity  dawned  on  the  busi- 
ness community.  On  May  first,  1896,  the 
Treasury  held  $125,500,000  free  gold,  and  the 


214  Money,  Silver,  and  Finance. 

New  York  Clearing  House  banks  held  $146,600,000 
in  money,  which  was  $22,900,000  above  the  reserve 
required  by  law.  The  Venezulean  matter  was  in  the 
hands  of  an  investigating  committee;  the  Cuban 
matter  was  not  troublesome;  and  new  dangers  were 
not  yet  above  the  horizon. 

President  Cleveland  has  carried  the  country 
through  the  three  years  of  revenue  deficiency, 
amounting  to  about  $140,000,000,  and  we  are  still 
upon  the  gold  foundation.  For  this  the  largest 
measure  of  gratitude  is  due,  and  perhaps  we  should 
not  indulge  in  criticism  of  the  ways  and  means  em- 
ployed. 

It  seems  to  me,  however,  that  the  country  might 
have  been  saved  about  two  years  of  worry  and  anx- 
iety, with  the  incalculable  loss  inflicted  upon  our 
industries,  if,  instead  of  a  great  jurist,  orator,  and 
statesman  at  the  head  of  the  Treasury  Department, 
there  had  been  a  man  of  skillful  touch,  with  his 
finger  on  the  financial  pulse  of  the  nation.  The 
panic  of  1893  was  not  quite  unique  in  its  character. 
Inactivity  in  trade  was  sure  to  follow,  and  the  Gov- 
ernment revenue  was  sure  to  diminish  even  without 
the  change  in  the  tariff,  then  prospective.  In  the 
natural  course  of  events,  too,  money  was  to  accu- 
mulate at  financial  centres,  and  people  who  would 
be  obliged  to  keep  their  capital  in  idle  money, 
might  choose  to  keep  only  gold,  that  being  the 
safest  kind  of  money.  In  fact,  the  currency  was  to 
become  redundant,  and  the  approaching  financial 


Redundancy.  215 

illness  was  to  require  all  the  skill  of  the  most  able 
doctor  in  finance  which  this  country  can  produce. 
But  no  prophet  was  needed  late  in  1893,  for  money 
had  already  accumulated,  and  a  preference  was 
already  shown  for  gold.  Yet  it  was  not  until  there 
was  widespread  alarm  concerning  the  Government's 
position  that  the  first  bond  sale  was  determined 
upon.  Then  the  Secretary  found  difficulty  in  get- 
ting help,  even  to  the  extent  of  $50,000,000  gold, 
although  more  than  twice  as  much  of  the  yellow 
metal  was  held  by  the  New  York  Clearing  House 
banks  alone.  He  had  waited  until  holders  of  gold 
felt  that  $50,000,000  would  do  little  good.  It 
might  have  been  easier  to  get  $100,000,000,  if  such 
a  sum  would  be  certain  to  suffice,  and  if  the  Secre- 
tary's own  record  up  to  that  time  were  felt  to  be  a 
sure  guarantee  that  the  country  would  be  kept 
upon  a  gold  basis,  at  any  cost  or  any  sacrifice;  for  it 
must  be  borne  in  mind  that  banks  and  bankers 
would  lose  by  financial  disturbance,  incident  to  our 
slipping  off  the  gold  base,  far  more  than  they  could 
hope  to  gain  by  selling  their  gold  at  a  premium, 
.  The  law  permitted  the  selling  of  bonds  at  not  less 
than  par  in  coin  (gold  is  not  named),  and  a  later 
law  declared  it  to  be  the  established  policy  of  the 
United  States  to  maintain  the  two  metals  on  a 
parity  with  each  other  at  the  ratio  of  16  to  1.  Of 
course  the  Government  must  keep  its  promises  to 
pay  on  demand,  and  therefore  all  its  money,  includ- 
ing paper,  must  be  kept  in  a  state  of  equality  in 


216  Money,  Silver,  and  Finance. 

purchasing  power.  The  national  disease  which 
appeared  in  the  winter  of  1893-1894  was  that  of 
paper-money  redundancy,  the  true  remedy  for 
which  is  paper-money  withdrawals.  Under  existing 
Jaw  paper  money  could  not  be  canceled — it  must 
be  reissued — but  it  could  have  been  drawn  into  the 
Treasury,  to  go  out  again  just  as  gold  was  actually 
drawn  in  only  to  go  out,  in  exchange  for  paper. 
In  stipulating  that  bond  purchasers  should  pay 
gold,  the  market  for  new  bonds  was  first  restricted 
to  those  who  held  gold,  and  then  a  new  demand  for 
gold  was  created,  this  demand  to  be  satisfied  by  the 
Treasury  itself.  To  sell  $50,000,000  bonds  for 
gold  was  difficult;  to  sell  $100,000,000  or  $200,- 
000,000  bonds  for  any  moneys  bearing  the  Govern- 
ment stamp  would  have  been  easy,  and  the  higher 
premium  to  be  obtained  would  have  amounted  to 
many  millions  of  dollars.  A  great  financier  in 
whom  the  world  had  absolute  confidence  might 
have  taken  the  stand  that  every  dollar  .of  Govern- 
ment money  must  be  kept  upon  a  par  with  all  the 
other  dollars;  that  creditors  of  the  Government 
must  be  paid  in  the  kind  of  Government  money 
which  they  choose  to  take;  and  that  debtors  to  the 
Government,  whether  the  debts  grow  out  of  taxes 
or  out  of  bond-purchasing,  must  be  allowed  to  pay 
in  the  kind  of  Government  money  which  such 
debtors  choose  to  offer.  It  is  the  business  of  the 
Government  to  draw  in  the  kind  of  money  which 
the  people  do  not  choose  to  keep.  Under  no  cir- 


Bond- Issuing.  217 

curnstance  should  the  Government  dishonor  any  of 
its  promises,  or  admit  that  one  or  two  kinds  of  its 
own  money  are  not  good  enough  for  the  Govern- 
ment itself  to  accept.  Standing  on  such  a  broad 
platform,  and  announcing  to  the  world  that  he 
would  sell  whatever  quantity  of  United  States  bonds 
should  prove  to  be  necessary  to  cure  the  existing 
disease,  the  right  man  would  have  received  the 
assistance  •  of  the  whole  community;  and  there  can 
be  no  doubt  that  a  sufficient  portion  of  the  pay- 
ments for  bonds  would  have  been  made  with  gold. 

It  would  have  been  seen  at  once  that  bond-sell- 
ing could  be  made  to  result  in  drawing  money  into 
the  Treasury  faster  than  it  would  go  out;  that  the 
market  rate  of  interest  on  loans  would  be  ad- 
vanced; and  that  exportations  of  gold  could  be 
stopped  or  importations  induced.  In  1896,  when 
there  was  a  greater  demand  for  money,  and  less 
money  lying  idle  in  bank  vaults,  the  people 
offered  to  buy  five  times  the  total  of  bonds  which 
the  Secretary  offered  to  sell,  and  even  with  gold 
payments  stipulated.  In  1894,  might  not  our  peo- 
ple have  been  rightly  approached,  given  confidence 
in  the  Treasury,  and  aroused  to  the  understanding 
that  to  protect  it  is  to  protect  ourselves,  and  to 
uphold  it  upon  the  gold  foundation  is  to  uphold  our 
own  structure  of  trade  and  industry? 

The  following  table  shows  the  condition  of  the 
Treasury  on  July  1,  1896,  and  the  amount  of 
money  in  general  circulation: 


218 


is 


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Circulation  Per  Capita.  219 

At  the  end  of  the  fiscal  year,  the  Government 
held  about  $100,000,000  free  gold,  as  the  foregoing 
table  will  show,  if  from  the  sum  of  gold  coin  held 
there  be  deducted  the  gold  certificates  outstanding, 
and  if  there  be  added  $32,217,024  worth  of  gold 
bullion  owned  at  that  time.  No  general  alarm  was 
felt  on  account  of  the  Treasury's  reserve  having 
again  reached  the  $100,000,000  mark.  Twenty-five 
million  dollars  in  gold  had  gone  out  in  the  last 
two  months;  but  this  was  in  the  period  of  ordinary 
annual  gold  exportation,  just  expired;  and  in  these 
two  months  the  revenue  deficiency  was  less  than 
$5,000,000.'  Besides,  Secretary  Carlisle  had  earned 
the  confidence  of  the  people. 

Comparing  the  figures  in  the  above  table  with 
those  in  the  tables  of  earlier  dates  (pp.  186,  206) 
the  recent  decline  in  circulation  per  capita  becomes 
evident.  As  the  population  must  continue  to  in- 
crease, a  further  decline  per  capita  appears  to  be 
inevitable,  unless  Congress  shall  provide  new  cur- 
rency. But  whether  circulation  per  capita  shall 
decline  or  not,  it  is  absolutely  certain  that  if  Con- 
gress will  do  nothing,  the  quantity  of  money  in  cir- 
culation must  be,  before  long,  precisely  that  quan- 
tity which  is  best  suited  to  the  wants  of  our  people. 
There  is  room  for  a  great  improvement  in  the 
quality  of  the  circulating  medium,  and  confident 
prediction  may  be  made  that  such  improvement 
naturally  will  be  made  by  injections  of  gold,  if 

*  Money  total  owned  by  Government  May  1,  1896,  $270,000,000, 
including  gold  reserve;  July  1,  1890,  about  $267.000,000. 


220  Money,  Silver,  and  Finance. 

simply  a  place  be  left  for  the  yellow  metal.  Silver 
heresies  and  silver  legislation  have  forced  us  to  use 
the  white  metal  and  its  paper  representatives;  have 
driven  gold  out  of  the  land;  and  have  cost  the 
industries  of  the  country  thousands  of  millions  of 
dollars.  Now  that  we  no  longer  burden  our  cir- 
culation with  paper  money,  issued  against  purchases 
of  silver  bullion,  gold  is  beginning  to  show  signs  of 
remaining  here.  The  world 's  annual  production 
of  the  precious  metal  has  grown  to  $200,000,000, 
of  which  nearly  one  quarter  is  mined  in  the  United 
States,  and  no  country  in  the  world  is  so  well  situ- 
ated for  securing  its  full  share,  for  here  the  most 
enterprising  and  energetic  people  in  the  world  are 
engaged  in  developing  the  greatest  natural  re- 
sources. Naturally  our  own  accumulations  of 
capital,  and  much  of  the  world's  accumulation, 
seek  investment  here,  and  it  is  not  creditable  to 
American  common-sense  that  for  many  years  in- 
vestors have  failed  to  receive  proper  encouragement 
by  an  assurance  that  an  investment  of  good  money 
would  yield  a  return  of  good  money.  Nobody 
could  foretell  how  far  the  silver  heresies  would  pre- 
vail, nor  whether  a  thousand  dollars,  worth  one 
thousand  gold  dollars,  when  invested  in  any  enter- 
prise would  be  worth  more  than  five  hundred  gold 
dollars  when  the  time  'should  arrive  for  reimburse- 
ment from  such  enterprise.  Worse  still  has  been 
the  feeling  among  investors,  that  the  possibly  com- 
ing financial  revulsion,  incident  to  our  slipping  off 


The  Gold  Supply.  221 

the  gold  base,  might  render  worthless  almost  any 
particular  investment.  Happily  now,  this  country 
is  approaching  the  time  when  a  practical  demon- 
stration may  be  made  of  the  theory  that  gold  will 
fill  any  void  in  the  circulating  medium. 

Stress  need  not  be  laid  on  the  decline  in  circula- 
tion per  capita,  although  much  money  is  carried  in 
people's  pockets,  and  therefore  the  per  capita  circu- 
lation has  to  be  considered.  The  impossibility  of 
financial  legislation,  in  the  present  state  of  disagree- 
ment between  the  branches  of  Government,  and  the 
fact  that  much  time  must  elapse  before  new  men  can 
actually  pass  laws,  give  good  ground  for  hoping  that 
before  any  disturbing  laws  can  be  passed,  either  the 
influx  of  gold  or  the  disappearance  of  the  exporta- 
tion habit  will  challenge  the  attention  of  theorists 
and  demand  an  explanation.  The  European  stock 
of  gold  is  the  largest  ever  known,  amounting  to  the 
equivalent  of  nearly  $900,000,000  in  the  four  gov- 
ernmental banks  of  England,  France,  Germany, 
and  Austria- Hungary  alone.  There  is  a  plethora 
of  gold  in  Europe,  owing  to  our  having  foolishly 
shosen  to  use  silver  and  silver  certificates  instead 
of  gold  and  its  representatives.  But  expanding 
trade  in  this  country,  with  its  usually  accompany- 
ing advancing  rate  of  interest,  ought  natur- 
ally soon  to  draw  gold  from  Europe,  or  to  keep 
our  own  gold  here  if  silver  heresies  can  be  kept 
down.  It  would  not  be  wise,  however,  to  say  that 
a  fifth  issue  of  Government  bonds  is  not  imini- 


2%2  Money,  Silver,  and  Finance. 

nent,  for  the  crops  of  1896  are  not  yet  assured, 
money  is  still  in  such  small  demand  that  gold  ex- 
portation is  talked  of  or  actually  taking  place, 
and  besides,  those  politicians  who  have  obtained 
possession  of  the  machinery  of  the  Democratic 
Party  are  doing  all  they  can  to  discourage  for- 
eign investment  in  American  securities.  On 
the  other  hand,  it  may  be  said  that  bond-issuing  is 
no  longer  a  prime  factor  in  financial  affairs,  for 
there  is  no  uncertainty  regarding  the  overwhelming 
success  of  another  loan  if  it  should  be  offered,  bonds 
of  the  last  two  issues,  known  in  the  market  as  4s  of 
1925,  commanding  a  premium  of  about  thirteen1  per 
cent.  If  it  could  be  known  that  in  case  another 
issue  of  bonds  shall  be  made,  payments  for  them 
may  be  made  by  checks,  the  checks  to  be  collected 
before  the  bonds  are  delivered,  time  for  payments 
and  delivery  being  extended  over  a  period  of  several 
months,  that  no  discrimination  will  be  made  against 
any  money  bearing  the  Government  stamp,  and 
that  the  only  preference  to  be  given  to  gold  will  be 
an  allowance  to  cover  the  cost  of  delivery,  say,  about 
one  quarter  of  one  per  cent.,  then  prospective  bond- 
issuing  need  not  check  any  enterprise,  for  the  public 
would  have  no  inducement  to  draw  gold  from  the 
Treasury  in  order  to  obtain  the  means  for  paying 
for  the  new  bonds,  the  Treasury  gold  might  not  get 
alarmingly  low,  and  if  it  did,  the  new  loan  would 
build  up  the  reserve  without  disturbance  to  business. 

1  Quite  recently  the  market  price  was  about  five  percent,  higher. 
The  decline  seems  to  be  owing  to  the  expectancy  of  a  new  issue. 


The  Election.  223 

[At  the  moment  of  going  to  press,  many  of  the 
banks  of  New  York  City  are  voluntarily  giving  gold 
to  the  Government  in  exchange  for  legal-tenders, 
its  gold  having  suddenly  fallen  below  $90,000,000. 
It  is  said  that  $20,000,000  gold,  about  one  third  of 
the  bank-holdings,  will  be  turned  into  the  Treasury. 
The  banks  of  other  cities  may  show  a  similar  spirit 
of  patriotism,  and  the  foreign-exchange  bankers  may 
assist  in  postponing  a  fifth  issue  of  Government 
bonds  by  selling  exchange  to  would-be  exporters  of 
gold,  thus  enabling  them  to  obtain  gold  in  London, 
the  bankers'  opportunity  for  reimbursement  occur- 
ring when  cotton  and  other  crops  move  across  the 
ocean.  ] 

The  Election  of  1896  will  afford  the  opportunity 
to  kill  and  deeply  bury  our  enormously  expensive 
notions  regarding  silver,  general  discussion  having 
shown  the  cuttle-fish  expediency  of  the  word  bi- 
metallism and  having^  forced  politicians  out  into 
the  open,  where  each  may  be  known  to  be  either  for 
the  Gold  Standard  or  for  the  Silver  Standard.  The 
currency  of  no  country  in  the  world  rests  practically 
upon  a  bi-metallic  base,  and  every  country  which 
has  not  restricted  its  silver  coinage  has  reached, 
necessarily,  the  silver  base  and  has  lost  its  gold.  Bi- 
metallism became  useless  for  campaign  purposes. 
Happily,  too,  Protection  is  laid  aside,  although  of 
course  those  who  believe  in  it  may  continue  to 
believe  in  it. 

The  important  plank  of  the  Republican  Platform 
is  as  follows: 


•>24  Money,  Silver,  and  Finance. 

"  THE  REPUBLICAN  PARTY  is  UNRESERVEDLY 

FOR  SOUND  MONEY.  IT  CAUSED  THE  ENACTMENT 
OF  THE  LAW  PROVIDING  FOR  THE  RESUMPTION  OF 
SPECIE  PAYMENTS  IN  1879;  SINCE  THEN  EVERY 
DOLLAR  HAS  BEEN  AS  GOOD  AS  GOLD. 

"  WE  ARE  UNALTERABLY  OPPOSED  TO  EVERY 
MEASURE  CALCULATED  TO  DEBASE  OUR  CURRENCY 
OR  IMPAIR  THE  CREDIT  OF  OUR  COUNTRY.  WE 
ARE  THEREFORE  OPPOSED  TO  THE  FREE  COINAGE 
OF  SILVER,  EXCEPT  BY  INTERNATIONAL  AGREE- 
MENT WITH  THE  LEADING  COMMERCIAL  NATIONS 
OF  THE  WORLD,  WHICH  WE  PLEDGE  OURSELVES  TO 

PROMOTE,  AND,  UNTIL  SUCH  AGREEMENT  CAN  BE 
OBTAINED,  THE  EXISTING  GOLD  STANDARD  MUST 
BE  PRESERVED.  ALL  OUR  SILVER  AND  PAPER 
CURRENCY  MUST  BE  MAINTAINED  AT  PARITY  WITH 
GOLD,  AND  WE  FAVOR  ALL  MEASURES  DESIGNED  TO 
MAINTAIN  INVIOLABLY  THE  OBLIGATIONS  OF  THE 
UNITED  STATES,  AND  ALL  OUR  MONEY,  WHETHER 
COIN  OR  PAPER,  AT  THE  PRESENT  STANDARD,  THE 
STANDARD  OF  THE  MOST  ENLIGHTENED  NATIONS 
OF  THE  EARTH." 

The  pledge  to  promote  an  international  agree- 
ment in  favor  of  the  free-coinage  of  silver  is 
puerile,  for  no  important  nation  will  enter  into  any 
such  agreement  with  us,  nor  will  argument  show 
that  a  general  agreement  is  desirable,  although 
wholly  impracticable.  International  conferences, 
however,  are  harmless,  and,  in  view  of  their  educa- 


Silver  Platform. 


tional  uses,  we  may  ignore  this  point,  and  gladly 
accept  the  Platform  and  commend  its  builders  for 
placing  the  party  in  the  position  of  upholding  the 
honor  and  the  credit  of  the  country. 

The  important  plank  of  the  Democratic  Platform 
is  as  follows: 

"  RECOGNIZING  THAT  THE  MONEY  QUESTION  is 
PARAMOUNT  TO  ALL  OTHERS  AT  THIS  TIME,  WE 
INVITE  ATTENTION  TO  THE  FACT  THAT  THE  CON- 
STITUTION NAMES  SILVER  AND  GOLD  TOGETHER 
AS  THE  MONEY  METALS  OF  THE  UNITED  STATES, 
AND  THAT  THE  FIRST  COINAGE  LAW  PASSED  BY 
CONGRESS  UNDER  THE  CONSTITUTION  MADE  THE 
SILVER  DOLLAR  THE  MONEY  UNIT  AND  ADMITTED 
GOLD  TO  FREE  COINAGE  AT  A  RATIO  BASED  UPON 
THE  SILVER  DOLLAR  UNIT. 

"  WE  DECLARE  THAT  THE  ACT  OF  1873,  DEMONE- 
TIZING SILVER,  WITHOUT  THE  KNOWLEDGE  OR 
APPROVAL  OF  THE  AMERICAN  PEOPLE,  HAS  RE- 
SULTED IN  THE  APPRECIATION  OF  GOLD  AND  A 
CORRESPONDING  FALL  IN  THE  PRICES  OF  COM- 
MODITIES PRODUCED  BY  THE  PEOPLE,  A  HEAVY 
INCREASE  IN  THE  BURDEN  OF  TAXATION  AND  OF 
ALL  DEBTS,  PUBLIC  AND  PRIVATE  ;  THE  ENRICH- 
MENT OF  THE  MONEY-LENDING  CLASS  AT  HOME 
AND  ABROAD,  THE  PROSTRATION  OF  INDUSTRY 
AND  IMPOVERISHMENT  OF  THE  PEOPLE. 

"  WE  ARE  UNALTERABLY  OPPOSED  TO  MONO- 
METALLISM, WHICH  HAS  LOCKED  FAST  THE  PROS- 


226  Money,  Silver,  and  Finance. 

FERITY  OF  Atf  INDUSTRIAL  PEOPLE  IN  THE  PAR- 
ALYSIS OF  HARD  TIMES.  GOLD  MONO-METALLISM 

is  A   BRITISH   POLICY,   AND   ITS  ADOPTION    HAS 

BROUGHT  OTHER  NATIONS  INTO  FINANCIAL  SER- 
VITUDE TO  LONDON.  IT  is  NOT  ONLY  UN- 
AMERICAN,  BUT  ANTI-AMERICAN,  AND  IT  CAN 
BE  FASTENED  ON  THE  UNITED  STATES  ONLY  BY 
THE  STIFLING  OF  THAT  SPIRIT  AND  LOVE  OF  LIB- 
ERTY  WHICH  PROCLAIMED  OUR  POLITICAL  INDE- 
PENDENCE IN  1776  AND  WON  IT  IN  THE  WAR  OF 
THE  REVOLUTION. 

"  WE  DEMAND  THE  FREE  AND  UNLIMITED 
COINAGE  OF  BOTH  SILVER  AND  GOLD  AT  THE  PRES- 
ENT LEGAL  RATIO  OF  16  TO  1,  WITHOUT  WAITING 
FOR  THE  AID  OR  CONSENT  OF  ANY  OTHER  NATION. 
WE  DEMAND  THAT  THE  STANDARD  SILVER  DOLLAR 
SHALL  BE  A  FULL  LEGAL  TENDER,  EQUALLY  WITH 
GOLD,  FOR  ALL  DEBTS,  PUBLIC  AND  PRIVATE,  AND 
WE  FAVOR  SUCH  LEGISLATION  AS  WILL  PREVENT  FOR 
THE  FUTURE  THE  DEMONETIZATION  OF  ANY  KIND 


The  thanks  of  the  nation  are  due  to  the  Demo- 
cratic Party  for  recognizing  that  the  money  question 
is  paramount  at  this  time.  The  reference  to  the 
Constitution  and  to  the  coinage  under  it  is  mislead- 
ing^ and  it  is  difficult  to  understand  what  is  meant 
by  the  British  policy  of  gold  mono-metallism.  Eng- 
land, by  not  permitting  the  issue  of  notes  below 
£5 — about  $25,  equivalent — forces  Englishmen  to 


Many  Ifs.  227 

carry  much  silver,  and  apparently  it  has  never 
occurred  to  Englishmen  that  India  might  be 
brought  into  more  certain  financial  servitude  if 
India  should  be  ordered  to  give  up  using  silver.  It 
is  true  that  it  would  not  suit  English,  French  or 
German  investors  in  American  enterprises  to  have 
us  adopt  the  policy  of  free-silver  coinage,  and  if  its 
adoption  were  probable,  both  foreign  and  domestic 
investors  would  try  to  sell  out.  Investors,  however, 
do  not  control  governments;  and  those  foreign  gov- 
ernments or  governmental  banks  which  have  been 
nearly  as  foolish  as  we  in  accumulating  vast  quanti- 
ties of  silver,  might  be  pleased  to  see  free-coinage 
adopted  here,  because  we  should  then  furnish  both 
a  good  market  for  silver  and  a  good  supply  of  gold. 
Still,  the  plank  may  be  welcomed  as  a  clear  declara- 
tion for  that  policy  of  free-silver  coinage  which  leads 
inevitably  to  the  silver-monometallic  base  for  all  our 
moneys;  that  policy  which  would  enable  a  few 
peculiarly  situated  debtors  to  defraud  their  creditors 
to  the  extent  of  about  fifty  per  cent. ;  that  policy 
which  means  industrial  paralysis,  business  failures, 
lack  of  work,  and  national  dishonor. 

The  friends  of  the  white  metal  would  be  able  to 
make  out  a  better  case  if  the  acts  of  governments 
could  properly  be  called  "  demonetization  "  acts; 
if  such  acts  had  not  been  forced  upon  governments 
by  the  natural  decline  in  the  market  price  of  silver 
bullion;  if  the  decline  in  the  prices  of  commodities 
were  due  to  such  acts  instead  of  to  natural  causes: 


228  Money,  Silver,  and  Finance. 

if  the  decline  since  1872  in  the  prices  of  com- 
modities were  a  bad  thing  for  the  vast  majority  of 
people;  if  the  producers  of  silver  were  better  en- 
titled to  governmental  favor  than  the  producers  of 
wheat  or  cotton;  if  most  of  the  years  since  1873  had 
not  been  years  of  unparalleled  industrial  growth  and 
development;  if  the  average  rate  of  wages  had  not 
advanced,  in  spite  of  declining  prices;  if  the  propor- 
tion of  unemployed  persons  had  become  unusually 
large;  if  money- scarcity  were  now  indicated  (?)  by 
an  average  high  rate  of  interest;  if  there  were 
actually  a  "  debtor  class;''  if  an  important  number 
of  debtors  could  possibly  be  benefited  by  free  coin- 
age; if  there  were  any  conceivable  way  by  which  the 
Government  could  make  money  plentiful  in  poor 
and  sparsely  populated  regions;  if  the  sums  of 
money  which  Americans  want  to  use  in  trade  and 
want  to  carry  in  their  pockets  could  be  increased  by 
act  of  Congress;  if  Gresham's  economic  law  had 
never  been  discovered;  if  no  disposition  to  export 
gold  had  been  shown;  if  any  country  in  the  world 
had  succeeded  in  its  efforts  to  make  gold  and  silver 
circulate  together  under  free-coinage  laws;  if  free 
coinage  of  silver  would  not  certainly  demonetize 
gold;  if  those  dead  American  statesmen  who  are 
quoted  in  favor  of  bi-metallism  had  lived  to  favor  it 
after  silver  had  become  cheap  and  plentiful;  if,  in  the 
evolution  of  the  world's  trade  and  industry,  silver  had 
not  been  rejected  and  gold  had  not  been  selected,  in 
the  most  natural  manner  possible;  if  wage-earners, 


Only  One  Issue.  229 

salary-earners,  pensioners,  savings-bank  depositors, 
and  life-insurance  beneficiaries  ought  not  be  paid  in 
the  best  kind  of  money;  or  if,  by  following  the  lead 
of  any  other  if,  we  should  find  any  invulnerable 
argument  in  support  of  the  silver  theory.  There  is 
no  such  argument,  and  the  duty  of  the  hour  is  to 
annihilate  the  plausible  assertions  which  are  put 
forth  by  silver  advocates. 

The  capture  of  the  Democratic  Party  by  the  advo- 
cates of  silver  did  not  put  up  the  market  price  of 
this  metal,  and  did  not  cause  a  great  panic  among 
investors;  but  because  the  financial  world  shows  no 
apprehension  of  Democratic  success  at  the  polls,  it 
must  not  be  felt  that  there  is  really  no  ground 
whatever  for  such  apprehension.  Great  armies, 
over-confident  and  cursed  by  inertia,  have  been 
beaten  by  small  armies  active  and  enthusiastic. 

Every  cause  but  the  cause  of  Sound  Money  under 
the  Gold  Standard  has  been  cast  aside.  To  merely 
win  in  such  a  struggle  would  be  disgraceful,  because 
the  good  name  of  our  country,  at  home  and  abroad, 
is  at  stake.  People  all  over  the  world  have  pur- 
chased American  bonds  and  stocks — national,  state, 
municipal,  corporate,  private — with  the  understand- 
ing that  when  the  time  should  arrive  for  selling  or 
for  redemption,  our  legal  money  would  be  as  valu- 
able as  it  was  at  the  time  the  purchases  were  made. 
Over  and  over  again,  in  legislation  and  by  public 
statements,  have  we  given  investors  good  ground  for 
such  an  understanding;  and  particularly  it  is  true  of 


230  Money,  Silver,  and  Finance. 

our  Government  bonds  that,  without  such  an  under- 
standing, they  could  not  have  been  sold.  Shall  it 
be  said  that  within  about  two  years  our  Government 
has  received  over  $290,000,000  gold  under  false 
pretences? 

Ever  since  the  first  of  January,  1879,  business 
enterprise  in  this  country  has  depended  in  large 
measure  for  its  assistance  from  American  and 
foreign  owners  of  money,  upon  the  assurance  that 
all  our  moneys  would  -be  kept  upon  an  equal  foot- 
ing. Profits  have  been  earned  and  salaries  and 
wages  have  been  paid  to  the  extent  of  many  millions 
of  dollars  in  excess  of  what  could  have  been  earned 
and  paid  if  capitalists,  instead  of  lending,  .had 
hoarded  their  money  in  the  belief  that  when  the 
American  people  should  get  a  chance  to  cheat  them 
it  would  seize  the  opportunity. 

Wage-earners  and  salary- earners  are  now  in  re- 
ceipt of  weekly  or  monthly  sums,  with  which  cer- 
tain quantities  of  goods  may  be  obtained.  The 
Silver  Party  sees  a  way  to  advance  the  prices  of 
these  goods,  but  sees  no  way  to  advance  wages  in 
order  that  the  wage-earner  shall  be  able  to  live  as 
well  as  he  lives  now.  On  the  contrary,  the  Silver 
Party  proposes  to  bring  about  a  financial  crash, 
which  would  paralyze  trade  and  industry,  and  throw 
millions  of  men  out  of  employment.  When  busi- 
ness got  used  to  new  conditions,  and  borrowers 
again  should  be  able  to  borrow,  prices  are  to  ad- 
vance, and  presumably  wages  are  to  limp  after,  but 
starting  from  a  new  and  very  low  level. 


Prosperity   Waits.  231 

Pensioners  have  been  allowed  good  money;  sav- 
ings-bank depositors  have  placed  good  money  in 
banks;  life-insurance  beneficiaries  are  entitled  to  as 
good  money  as  was  paid  to  the  companies  in  pre- 
miums. But  the  Silver  Party  sees  no  injustice  in 
trying  simply  to  put  up  the  prices  of  goods,  failing 
to  see  that  all  people  whose  incomes  are  now  fixed 
by  law  or  contract  would,  if  obliged  to  pay  high 
prices,  be  cut  off  from  much  of  their  usual  supply 
of  the  necessities  and  luxuries  of  life.  A  certain 
sum  of  money  would  buy  a  smaller  quantity  of  goods 
at  high  prices  than  now  at  low  prices. 

It  is  not  enough  to  carry  the  presidential  election 
only.  Tremendous  efforts  must  be  made  to  carry 
as  many  congressional  districts  as  possible.  The 
Senate  of  the  United  States  stands  for  Silver,  and 
is  likely  to  so  stand  during  the  life  of  the  next 
House  of  Representatives.  The  election  must  make 
this  branch  of  the  Government  overwhelmingly  in 
favor  of  the  Gold  Standard.  The  formation  of  a 
tariff-silver  combination  by  an  important  number 
of  the  members  of  both  houses  of  Congress  must  be 
rendered  absolutely  impracticable. 

Prosperity  waits  for  the  assurance  of  Sound 
Money.  Profit-earners,  salary-earners,  wage-earn- 
ers would  do  well  to  forego  a  portion  of  their  pres- 
ent income  to  insure  their  future  income.  Pension- 
ers, savings-bank  depositors,  and  life-insurance 
beneficiaries  should  help  in  the  struggle  to  keep  the 
value  of  money  up  to  the  present  level.  Every 


232  Money,  Silver,  an>l  Finance. 

good  citizen,  not  excepting  any  of  the  wise  and  sol- 
vent debtors,  should  be  willing  to  take  time  from 
his  usual  pursuits  to  settle  forever  the  silver  ques- 
tion. No  sacrifice  is  too  great  to  make  certain  the 
crushing  defeat  of  the  Silver  Party,  to  protect  our 
national  honor,  to  uphold  the  American  people's 
reputation  for  honesty,  and  to  obtain  the  lasting 
assurance  that  every  American  political  party  of  the 
future  shall  inscribe  upon  its  banner  Sound  Money 
and  Honest  Finance. 


INDEX. 


American,  business  ways,  199;  business  expressions,  27,  28;  borrowing, 
132-134;  common  sense,  174-220 ;  conditions,  only,  198;  dollars,  equal- 
ity of,  216;  preference  for  paper  money,  3,  19,20;  securities,  126, 
I'i7,  131,  135;  silver,  147,  148;  travelers,  128 

Atkinson,  Mr.  Edward,  16,  29,  86,  87 

Austria-Hungary,  170,  221 

Balance  of  trade,  114,  115 

Bank  clearings,  179,  180,  203 

Hanking  and  currency  measures,  226 

Banking,  evolution  of,  9-11;  English,  5,  194;  facilities,  161;  French,  198 

Bank,  of  England,  5,  16,  187.  221 ;  of  France,  151-154,  193,  note,  221 

Bartine,  Hon.  Horace  F.,  72-76,  154,  172,  173 

Beck,  Mr.  William  H.,  80-83 

Bi-metallism,  223 

Bland,  Hon.  Richard  P..  154,  166.  171-174 

Bond-selling,  209,  213,  222;  bond  premium,  222 

British  Royal  Commission,  33,  38 

Bui  I  ion- value  dislocation,  38 

Business,  assumptions,  95,  99;  growth,  161, 181, 182;  sayings,  27, 28,  38, 

93;  ways,  177-182;  American,  199 
Buyer,  a  very  good,  148,  149, 155,  156 
Buyers  and  sellers,  62-66 

Carlisle,  Secretary,  219 

Campaign  against  silver  theories,  223 

Capital,  timidity  of,  111,  138;  foreign,  132,  135, 143 

China,  18,  20,  22'.  35,  47,  56,  58,  163 

Circulation,  general.  221;    reduction  from  pro-silver  legislation,  165; 

tables,  186,  206,  218;  late  decrease,  219 
Circulation,  per  capita,  184-186,  191,  note,  206,  218,  219,  227;  in  France, 

191-193:  in  the  East,  198;  in  the  United  Kingdom,  194,  note. 
Civilization,  financial  tests  of.  18-21 
Clraring  House,  16 ;  certificates,  196, 197, 208 ;  work,  177-180, 196, 197;  New 

York,  transactions,  179,  180;  the  world's,  5,  180,  181 
Cleveland,  President,  214 

Coinage-parity  or  ratio  of  silver  to  gold,  150-154,  159-162 
Coins,  41,  50 
Colorado,  81 
Committee  of  House  on  Coinage,  Weights,  and  Measures,  Fifty-first 

Congress,  5,  29,  note,  58,  66-72,  75,  168-173, 184 
Commodities,  cost  of  production,  40, 44 
Comstock  miners,  73,  74 
Congress,  duty  of,  21,  22,  31 
Confidence,  211 
Copper,  3, 157 

Corn,  English  meaning  of  word,  25,  note 
Coup  de  Finance,  154 
Credit,  base  of,  195 


Index. 


Creditors  or  debtors?  101-118 
Cuba,  47 

Cu-rency  famine,  204 
Currency  theories,  48 

Debtors,  corporations,  104;  farmers  and  planters,  105;  governments, 
103  merchants,  104;  no  "debtor  class,"  106;  individual,  injured 
bv  laws  intended  to  benefit,  109-113;  dishonest  (?),  112;  debtors  or 
creditors?  101-113 

Democratic  Platform,  225 

Denver,  77 

Depression,  68,  78,  202 

"  Dislocation,"  40,  41 

Dollars,  American,  equality  of  all,  216;  Mexican,  54 

Dunbar,  Prof.  Charles  F.,  193,  note 

Election  of  1896,  223 

Employers,  65 

Engineering  and  Mining  Journal,  New  York,  iv.,  72,  73,  76,  77, 160 

England,  5,  20.  39,  221 

English  habit,  194 

Europe,  4.  163,  221 

Evening  Post,  New  York,  116,  note 

Evening  Telegram,  New  York,  144,  note,  150, 158 

Farmers,  31,  33,  37.  38,  49,  83,  84,  table,  89-91, 104, 192 

Financial  contrivances,  16-18,  205 

Financial  floundering,  204 

Financiers,  10 

First  Principles,  24 

Foreign  Exchange,  52,  55,  58,  115, 116:  balance  of  indebtedness,  121-124; 

"favorable"  trade,  116-121;  guide  to  legislators,  143;  inferences  to 

be  drawn  from  rate  of,  129-131;  movements  of  securities,  121-124; 

par  of  exchange,  115;    rate  of,  a  test  of  the  circulating  medium, 

199-201 ;  rare  of  interest,  128 
Foster,  Sec  of  Treas.,  56 
France,  4,  20,  89;  Bank  of,  151-154, 193,  note,  221 ;  circulation  per  capita, 

191-193 

Free-coinage,  157,  note ;  see  Silver ;  trying  it  for  a  year,  155 
Freight  remittances,  125 

Gaul,  a  wily,  154 

Germany,  4,  20,  89,  221 

Gold,  accumulating,  221;  American  production,  220;  circulation,  186; 
certificates,  186;  demand  for,  164,  165;  demonetization,  5,42:  En- 
glish need  for,  5:  exportation,  121,  128,  130,  131,  137,  149,  151-155. 
201 ;  how  to  supply  Europe,  165;  importation,  121,  130,  131,  137;  lit- 
tle used  in  business,  21 ;  misuse  in  Europe.  20:  movements  of, 
115-119,  180,  181;  premium,  143;  production,  128,  160,  200,  220; 
proper  base  of  value,  3;  stability  of,  6.  8,  21,  22;  supplying  for- 
eigners with,  201;  supply  of,  221;  unsuitable  for  small  coinage,  3; 
unsuitable  for  haud-to-hand  use,  3 

Gold  Hill,  73,  76 

Goschen,  Right  Hon.  George  J.,  M.P.,  115,  note 

Governmental  safeguards,  15, 16;  embarrassment,  209,215 

Greenback  retirement,  227 

Gresham's  Law,  4,  142 

Grier,  Mr.  John  A.,  30,  39 

H.,  Mr.,  144,  145,  147,  148 

Happy  Community,  73 

History  of  American  Currency,  £ 


Index. 


History  of  Prices,  187-191 

Holland,  163 

Homer,  1 

Horton,  Mr.  S.  Dana,  39,  note 

Ifs  and  ifs,  225 

Increase  in  circulating  medium,  184-186,  191,  note 

Indebtedness,  balance  of,  121;  character  of,  134;  to  foreigners,  121-124 

India,  18,  2J,  22,  35,  36,  45-47,  49-61,  163 

liKltiNtriol  Progress  of  the  Nation,  86 

Industries,  American,  89-100;  European,  89-92;  development  of,  44-48 

Interest  and  dividends,  125,  128 

International,  conferences  and  agreements,  31.39;  movements  of  89 

curities,  121-124 
Inventions  and  discoveries,  44 
Investors,  220 
Italy,  92 

Japan,  22,  163 

Joke,  a,  at  our  expense,  149 

Jones,  Mr.  John  P.,  73-75 

Labor-saving  inventions  and  machinery,  40,  44,  88-100 

Labor  organizations,  67,  68 

Leech,  Hen.  E.  O.,  Director  of  the  Mint,  168-173,  184 

Life-insurance  beneficiaries,  113 

Lippincott  s  Magazine,  iv.,  30,  37 

London,  World's  Clearing-House,  5, 180,  181 

Manning:,  late  Secretary,  30,  32,  38,  39 

McKinley  Law,  203 

Mexican  dollars,  54;  silver,  147 

Mexico,  22,  35,  163 

Mint,  operation,  173 

Monetary  changes,  39,  44,  48;  dislocation,  31,  32,  38,  40 

Money,  accumulation  at  financial  centres,  208;  and  prices,  183,  184; 
cheap,  101-113;  Confederate,  57;  demands  for  more,  201;  displace- 
ment of  best,  201;  erroneous  notions,  185-187;  evolution  of,  1-3, 
7,  12;  glut,  208;  hoarding.  207;  how  used  in  trade,  177-182;  kinds 
in  circulation,  186.  206,  218,  table;  limited  demand  for,  162;  not 
appreciated  in  value,  50:  or  Wealth?  162,  195;  Oriental,  54;  paper, 
12-16,  57,  201 ;  plentiful,  140,  141 ;  proportion  of  kinds,  199-201 ; 
quantity  of  gold  and  silver  in  ihe  world,  175;  relative  positions 
of  the  metals,  3;  held  by  Clearing-House  banks,  207.  208,  212,214; 
tables  of  circulation,  186,  206,  218;  temporary  substitutes,  196, 
197,  205;  volume  iacreasing,  prices  falling,  184,  185 

Mono-metallism,  35 

Montana,  80 

National  bank  notes,  186,  206,  218 
New  Granada,  45 
Newlands,  Hon.  Francis  G.,  83 
New  processes,  44-48 
Nottingham  Guardian,  22,  note 

OK,  58 

Oriental  bankers,  61;  <u)nsun)«;rs,  51-55;  exporters,  51-55;  ignorance, 

19;  importers,  51-55:  TV  Drays,  19,  54;  people,  19;  producers,  51-55' 

use  of  money,  19;  ^'*ge%  39 
Our  special  partners,  139 


Index. 


Panics,  71, 77, 187,  note,  195-197 

Panic  of  1893.  203,  207, 208 

Pensioners,  113 

Political  parties,  223;  political  platforms,  223,  224 

Popular  loan,  213 

Price-currents,  187-190 

Prices  of  commodities,  decline  in,  29-36,  43,  50,  65,  78,  83,  84;  benefit 

of  the  decline,  45-48,  62,  79,  86,  87;  decline  not  affee  ;ing  wages.  72; 

naturalness  of   the  decline,   38,  40,  42-48,  93,  95-99;    uudulatory 

movement  of  prices,  23-29,  199 
Production  of  gold  and  silver,  160,  table 
Prosperity,  69-79,  86-88,  99,  100,  223 
Pueblo,  77 
Pugh,  Senator,  154  > 

Quinine,  45,  46,  note 

Recent  Economic  Changes,  23,  38,  42 

Redemption,  209;  customary,  177-182;  "  ultimate,"  175-177 

Redundancy,  214 

Republican  Platform,  224 

Reserve,  164 

Revenue,  202 

Revenue  deficiency,  203,  204,  214 

Rupee,  49-61;  actual  value,  49,  note;  nominal  value,  49,  note 

Russia,  58 

Savings  banks,  102,  113 

Secretary  of  the  Treasury,  204 

Securities,  description  of,  126,  127;  fear  of  influx;  131;  movements  of, 
121-124,  135-140 

Seignorage,  157,  note 

Senate,  224 

Silver,  Act  of  July  14, 1890,  149.  202;  advocates,  62,  185;  American,  147, 
148;  Am.  view,  6:  ctfs..  186.206.218;  circulation,  1^6.  206, 218;  coinage, 
30;  profit  on,  166,  167;  coins,  3,  41,  50;  cost  of  producing,  80-S2; 
"demonetization,"  29.  31,  3(5,  40-42.  68,  100.  159.  185:  educating  up 
to  silver  standard,  163;  enforced  circulation,  20;  European  policy, 
4,  20,  163,  164,  170.  171:  evolution.  2-5;  exportation.  149;  fear  <'.f 

Ero-silver  legislation,  135-140:  no  benefit  to  come  from,  109-112; 
ree  coinage,  iv.,  145-149,  150-155.  163-167:  the  eqrivalent  of  un- 
limited purchase,  165-174;  governmental  action,  4,  31,  45.  100,  102, 
113,  157,  163,  201;  hoarding,  v.,  60,  61,  74,  75;  heresies,  220:  impor- 
tation. 145-154;  improvements  in  mining.  80-82:  in  Bank  of  France, 
151-154;  instability,  21,  22;  in  1873,  70;  lost  caste,  8;  Mexican,  147; 
mining  industry,  iv.,  73-83,  147-149.  155-157,  201:  wages  of  miners, 
73.74;  mono-nietailism,  35:  Oriental  demand,  55-57,  59:  "out- 
lawry," 29,  40,  41,  42;  pathetic  view,  5;  price  or  value,  6,  8,  41,  43, 
60,  106.  145,  140,  150-157,  162-174;  production.  4.  6,  8,  9,  76,  157.  IliO; 
cost  of,  80-82;  purchase,  iv.,  31,  39,  145-149,  163-167,  171-173,  200; 
restoring  (*),  33;  secondary  money,  3.  8;  subsidiary,  186,  200.  218; 
suitable  for  poor  countries,  18-20,  22;  supply,  4,  145,  146,  151-154, 
157,  163,  164,  170;  taxing  importations,  148;  Treasury,  the,  as  a 
market  for,  164,  170;  Treasury  notes,  186,  206,  218,  table;  vital 
point  in  silver  question,  65,  66;  world's  view,  161 

Silver  in  Europe,  39,  note 

Smith.  Adam,  1 

Societ6  des  Metaux.  157 

Sound  money,  right  of  way,  227 

South  America,  22,  46 

Southern  borrowing,  133 

Spencer,  Mr.  Herbert,  24,  43.  48 


Index. 


Stewart,  Senator,  144-146,  154,  158,  159,  161-168,  174,  175,  182;  possible 

punishment,  145 
St.  John.  Mr.  Wm.  P.,  150-154 
Sugar,  47 

Sumner,  Prof.  Wm.  G.,  2 
Supply  and  demand,  not  equal,  25 

Tariff  agitation,  224 

Taylor,  Hon.  Abner,  168,  169 

Tea,  47 

Theory  and  History  of  Banking,  193 

Theory,  an  exploded,  185-191,  194 

Theory  of  the  Foreign  Exchanges,  115,  note 

Tooke,  Thomas,  187-191 

Trade,  evolution,  1-12;  expressions.  27,  28;  payments,  177-182;  undula 

tory  movement,  24-29.  184 
Treasury  notes,  186,  206,  218,  tables 
Treasury  receipts,  209 

Treasury  stock  of  gold.  206,  209,  210,  211,  212,  213,  218 
Treasury  protecting,  210 
Treasury,  Secretary  of,  204,  215,  216,  217 

United  States  notes,  186,  206,  218,  tables 

Vaux,  Hon.  Richard,  170,  171 

Venezuelan  panic,  211 

Virginia  City,  73,  76 

Vital  point  in  silver  question,  65,  66 

Volume  of  money,  14-16,  48,  141,  142,  186,  206,  218,  tables,  191 ;  increas- 
ing while  prices  decline.  184,  185;  in  different  countries,  192-194; 
persistent  theory,  183-184;  tests  of,  197-199 

Wage-earners,  63-79,  85,  table,  97,  99-103 

Wages,  19,  50,  64-79,  82,  84-103.  231;  advance  in,  64,  65,  85;  how  ad- 
vanced, 90-100;  illustration  of  advance,  93-95;  rate  in  proportion 
to  results,  97,  98 

Walker,  Hon.  Joseph  H.,  83-85,  169,  170,  173 

Wampum,  2,  7,  8 

Warner,  Hon.  John  De  Witt,  205 

Wealth  or  Money  (?),  162,  195;  base  of  credit,  195 

Wells,  Hon.  David  A..  23,  24,  42,  45 

Western  borrowing,  133 

Williams,  Hon.  James  R.,  172 

Wilson  Law,  203 

World's  philanthropist,  a,  165 


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THE  UNIVERSITY  OF  CALIFORNIA  UBRARY 


